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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 12, 1998
BROOKDALE LIVING COMMUNITIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-22253 36-4103821
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(State or other jurisdiction of Commission File Number (I.R.S. Employer
incorporation or organization) Identification Number)
77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 977-3700.
NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 12, 1998, Brookdale Living Communities of California, Inc. ("BLC-
California"), a subsidiary of Brookdale Living Communities, Inc., entered into
an operating lease (the "Atrium Lease") with the Atrium of San Jose LLC, an
unaffiliated third party (the "Atrium Lessor"), pursuant to which BLC-California
leases a 292-unit senior and assisted living facility located in San Jose,
California, known as The Atrium of San Jose (the "Atrium Facility"). The
initial term of the Atrium Lease commenced on May 12, 1998 and expires on May 1,
2003. BLC-California has the option to renew the Atrium Lease for up to five
(5) one-year periods through May 1, 2008. Under the initial term of the Atrium
Lease, BLC-California is obligated to make monthly rent payments in the amount
of $191,551 and variable quarterly rent payments, the amount of which varies
based on LIBOR and is estimated to be approximately $27,000. During the term of
the Atrium Lease, BLC-California is responsible for the payment of all operating
expenses related to the Atrium Facility. BLC-California's obligations under the
Lease are secured by a pledge of securities currently valued at approximately
$6.97 million. The Atrium Lease grants BLC-California the option to purchase
the Atrium Facility from the Atrium Lessor. The Atrium Lessor purchased the
Atrium Facility on May 12, 1998, in part, by the assumption of an existing
mortgage loan held by LaSalle National Bank, as Trustee for the Registered
Holders of DLJ Mortgage Acceptance Corp., Commercial Mortgage Pass-Through
Certificates, Series 1996-CF1, and with funds contributed to the Atrium Lessor
by SELCO Service Corporation. A portion of the contributed funds consisted of
proceeds of loans made to SELCO Service Corporation by Healthcare Realty Trust
Incorporated and Key Corporate Capital, Inc.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial statements of businesses acquired
The financial statements required by Item 7(a) are presently being prepared
and have not been included in this Form 8-K. The required financial statements
will be filed by an amendment as soon as practical and, in any event, within 60
days from the date of this report.
b) Pro forma financial information
The pro forma financial information required by Item 7(b) is presently
being prepared and has not been included in this Form 8-K. The required pro
forma financial information will be filed by an amendment as soon as practical
and, in any event, within 60 days from the date of this report.
c) Exhibits
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<CAPTION>
Exhibit
Number Description
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<S> <C>
10.1 Lease dated as of May 11, 1998 by and between Brookdale Living
Communities of California, Inc., as lessee, and Atrium of San Jose
LLC, as lessor-owner
</TABLE>
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<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
10.2 Note and Deed of Trust Modification and Assumption Agreement dated
as of May 12, 1998 by and among LaSalle National Bank, as Trustee
for the Registered Holders of DLJ Mortgage Acceptance Corp.,
Commercial Mortgage Pass-Through Certificates, Series 1996-CF1
("Trustee"), Atrium Venture, The Atrium of San Jose LLC and
Brookdale Living Communities of California, Inc.
10.3 Leasehold Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of May 12, 1998 by Brookdale Living
Communities of California, Inc. in favor of The Atrium of San Jose
LLC
10.4 Pledge and Security Agreement dated as of May 12, 1998 by Brookdale
Living Communities of California, Inc. and The Atrium of San Jose
LLC in favor of Key Corporate Capital, Inc. and SELCO Service
Corporation
10.5 Indemnity and Guaranty Agreement dated as of May 12, 1998 from
Brookdale Living Communities of California, Inc. and Brookdale
Living Communities, Inc. in favor of Trustee
10.6 Hazardous Substances Indemnity Agreement dated as of May 12, 1998
from The Atrium of San Jose LLC, Brookdale Living Communities of
California, Inc. and Brookdale Living Communities, Inc. in favor of
Trustee
10.7 Indemnity and Guaranty Agreement dated as of May 12, 1998 from
Brookdale Living Communities, Inc. in favor of Healthcare Realty
Trust Incorporated
10.8 Indemnity Agreement dated as of May 12, 1998 by and among Brookdale
Living Communities, Inc. in favor of The Atrium of San Jose LLC,
Healthcare Realty Trust Incorporated, Key Corporate Capital, Inc.,
SELCO Service Corporation and Wilmington Trust Company
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BROOKDALE LIVING COMMUNITIES, INC.
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Registrant
Dated: May 26, 1998 By: /s/ Robert J. Rudnik
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Robert J. Rudnik
Executive Vice President
General Counsel and Secretary
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EXHIBIT 10.1
19478/8
Agenda No. 1.3
Lease Agreement
______________________________________________________________________________
LEASE AGREEMENT
dated as of
May 11, 1998
by and between
Atrium of San Jose LLC , a Delaware limited liability company
as Lessor-Owner
and
Brookdale Living Communities of California, Inc., a Delaware corporation,
as Lessee
______________________________________________________________________________
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TABLE OF CONTENTS
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<TABLE>
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Page
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<S> <C> <C>
Section 1. Definitions........................................................... 2
Section 2. Agreement to Lease.................................................... 3
Section 3. Term.................................................................. 3
Section 4. Conditions Precedent Prior to Basic Term Commencement Date............ 3
Section 5. Rental................................................................ 5
Section 6. Use................................................................... 6
Section 7. Net Lease; Nonterminability........................................... 6
Section 8. Taxes and Other Charges; Laws and Agreements.......................... 7
Section 9. Liens................................................................. 10
Section 10. Ownership of the Leased Property...................................... 11
Section 11. Owner's Disclaimer; Acknowledgement by Lessee......................... 12
Section 12. Representations of Parties............................................ 13
Section 13. Maintenance; Quiet Enjoyment.......................................... 16
Section 14. Compliance with Legal Requirements.................................... 18
Section 15. Insurance............................................................. 19
Section 16. Loss, Damage or Destruction........................................... 22
Section 17. Additions and Improvements; Removal................................... 25
Section 18. Right Of Entry........................................................ 26
Section 19. Assignments and Subleasing; Subordination and Attornment.............. 26
Section 20. Environmental Matters................................................. 30
Section 21. Environmental Indemnity............................................... 33
Section 22. Indemnification and Hold Harmless Agreement........................... 34
</TABLE>
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<TABLE>
<S> <C> <C>
Section 23. Events of Default by Lessee........................................... 36
Section 24. Remedies Upon Default................................................. 37
Section 25. Owner's Right to Perform for Lessee................................... 40
Section 26. Expenses.............................................................. 41
Section 27. Further Assurances.................................................... 41
Section 28. Notices............................................................... 41
Section 29. Lessee's Extension Lease Options and End of Term Purchase Options..... 43
Section 30. Third Party Sale of Leased Property................................... 44
Section 31. End of Term Adjustment................................................ 45
Section 32. Procedure for Owner Conveyance........................................ 46
Section 33. Time of the Essence; Manner of Payment................................ 47
Section 34. Return of Leased Property............................................. 48
Section 35. Financial Information................................................. 49
Section 36. Recording............................................................. 50
Section 37. No Reliance........................................................... 50
Section 38. Miscellaneous......................................................... 50
Section 39. Venue; Governing Law.................................................. 51
Section 40. Estoppel Certificate.................................................. 51
Section 41. Survival of Representations, Warranties and Covenants................. 51
LIST OF EXHIBITS
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EXHIBIT A Legal Description of Land
EXHIBIT B Base Rental
EXHIBIT C Termination Values and Purchase Prices
EXHIBIT D Maximum Lessee Risk Amount and Maximum Owner Risk Amount
</TABLE>
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LIST OF SCHEDULES
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SCHEDULE I List of Listed Permits..............................................
SCHEDULE II List of Acceptable Hazardous Materials..............................
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LEASE AGREEMENT
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THIS LEASE AGREEMENT (the "Lease"), dated as of May __, 1998, by and
between Atrium of San Jose LLC, a Delaware limited liability company, as owner-
lessor hereunder ("Owner") and Brookdale Living Communities of California, Inc.,
a Delaware corporation, as lessee hereunder ("Lessee").
PRELIMINARY STATEMENT
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Brookdale Living Communities, Inc., a Delaware corporation ("Brookdale")
has entered into a Purchase and Sale Agreement by and between Atrium Venture, a
California limited partnership, as seller, and Brookdale, as purchaser, dated as
of February 10, 1998 (the "P&S") to acquire a parcel of land consisting of
approximately 10.14 acres, more or less, located in the City of San Jose, County
of Santa Clara, California, (the "Land") as more particularly described in
Exhibit A attached hereto, together with all structures, buildings and
improvements of every kind and description now or at any time hereafter located
or placed on the Land (the "Improvements") which include, without limitation,
two residential buildings of approximately 243,186 square feet, one common
building of approximately 20,600 square feet and certain parking facilities and
driveways (the Land and Improvements, together with all related personalty,
easements, privileges, rights and appurtenances thereto, are referred to
collectively as the "Leased Property"). Brookdale has determined that the most
advantageous financing for the acquisition of the Leased Property can be
realized by assigning purchaser's rights under the P&S to Owner, permitting
Owner to purchase the Leased Property and causing the Lessee to lease the Leased
Property from Owner pursuant to this Lease, which Lease is intended to be an
operating lease for accounting purposes under GAAP. The date upon which
Brookdale assigns the P&S to the Owner, the Owner acquires the Leased Property
from the Seller and Lessee and Owner enter into this Lease is referred to as the
"Closing Date".
On the Closing Date, Owner will purchase the Leased Property pursuant to
the P&S for a price of $31,100,000 (the "Acquisition Price"), which Acquisition
Price includes the assumption of certain outstanding debt incurred by the Seller
to Column Financial, Inc., a Delaware corporation (the "Original Lender"), which
is now held by LaSalle National Bank, as Trustee for the Registered Holders of
DLJ Mortgage Acceptance Corp., Commercial Mortgage Pass-Through Certificates,
Series 1996-CF1 (the "Trust") (the Trust, together with its successors and
assigns, the "Senior Lender"), in the original principal amount of EIGHTEEN
MILLION FOUR HUNDRED THOUSAND DOLLARS ($18,400,000) (the "Senior Loan"). The
remainder of the Acquisition Price shall be provided by the Owner from the
proceeds of an equity contribution in the amount THIRTEEN MILLION SEVEN HUNDRED
THOUSAND DOLLARS ($13,700,000) ("Owner's Equity") which amount will be provided
by the majority member of the Owner, SELCO Service Corporation, an Ohio
corporation ("SELCO"), from (i) the proceeds of a nonrecourse loan to be made to
SELCO from Healthcare Realty Trust Incorporated, a Maryland corporation
("Healthcare Realty"), in the amount of SIX MILLION EIGHT HUNDRED THOUSAND
DOLLARS ($6,800,000) (the "A Investor Loan"), (ii) the proceeds of a nonrecourse
loan to be made to SELCO from Key Corporate Capital, Inc., a Michigan
corporation ("KCCI") in the amount of FIVE MILLION NINE HUNDRED FORTY-SIX
THOUSAND DOLLARS ($5,946,000) (the "B Investor Loan," and together with the A
Investor Loan, the "Investor Loans"), and (iii) equity provided by
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SELCO from its own funds in the amount of NINE HUNDRED FIFTY FOUR THOUSAND
DOLLARS ($954,000) (the "SELCO Contribution"). The A Investor Loan will be
secured by a pledge of the membership interests in Owner owned by SELCO and the
stock interest in The Atrium of San Jose, Inc., the managing member of the
Owner. The B Investor and the SELCO Contribution will each be secured by a
pledge of the "Supplemental Collateral" as defined below.
This Lease provides for a Basic Lease Term of five (5) years. Upon the
expiration of the Basic Lease Term, Lessee will have options to extend the Term
of the Lease for five (5) consecutive one (1)-year Extension Lease Terms. At
the end of the Basic Lease Term or any Extension Lease Term, Lessee has an
option to purchase the Leased Property for the Purchase Price set forth in
Exhibit C to this Lease. If Lessee does not exercise its option to purchase the
Leased Property, Lessee is obligated to solicit bids for the purchase of the
Leased Property from third parties. If the Leased Property is sold to a third
party pursuant to the provisions of this Lease or is returned to the Owner upon
the completion of the Basic Lease Term or any Extension Lease Term or upon any
Termination Date, Lessee will be obligated to pay the applicable End of Term
Adjustment provided for in this Lease to Owner.
On the date hereof, the Owner shall execute and deliver for the benefit of
SELCO, and KCCI a nonrecourse guaranty under which Owner guarantees the payment
and receipt by SELCO and KCCI Basic Rent and the B Investor Loan Debt Service,
respectively. Pursuant to the Owner's Pledge Agreement, the Lessee shall pledge
to Owner (which pledge will be assigned to KCCI and SELCO as security for the
nonrecourse guaranty) two Certificates of Deposit each issued by Fleet National
Bank or such other bank constituting an "Acceptable CD Issuer" (as defined in
the Owner Pledge Agreement) to secure the performance and payment of Lessee's
obligations hereunder. One certificate of deposit shall be issued in the
principal amount of SIX MILLION TEN THOUSAND SIX HUNDRED TWO AND 12/100 DOLLARS
($6,010,602.12) and the other certificate of deposit shall be issued in the
principal amount of NINE HUNDRED FIFTY-FOUR THOUSAND DOLLARS ($954,000). The
Certificates of Deposit will be delivered to Key Bank National Association,
which shall hold the Certificates of Deposit as custodian for KCCI and SELCO in
accordance with the Owner Pledge Agreement.
The Lessee shall execute and deliver to Owner a Notice of Lease and
Leasehold Deed of Trust granting to Owner a Lien on the Lessee's interest in the
Leased Property.
In consideration of the mutual covenants and agreements herein contained,
the parties hereto agree as follows:
Section 1. Definitions. Unless the context otherwise requires, and except
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as specifically provided herein, each of the capitalized terms shall have the
meaning set forth in the Definitions Appendix attached to this Lease, as the
same may be amended, modified or supplemented from time to time.
Unless otherwise expressly stated, the words "this Lease," "herein,"
"hereunder," "hereof" or other like words mean and include this Lease and the
Definitions Appendix, all exhibits hereto and each amendment and supplement
hereto.
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Section 2. Agreement to Lease. Owner hereby leases, lets and demises unto
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Lessee, and Lessee hereby leases, rents and takes possession from Owner, all of
the Owner's right, title and interest in the Leased Property, to have and to
hold the same for the Term, subject to the covenants, agreements, terms,
conditions, limitations and provisions hereinafter set forth.
Section 3. Term.
----
The Basic Lease Term shall commence on the Closing Date, and, unless this
Lease is sooner terminated pursuant to the provisions hereof, shall end on the
Basic Lease Term Expiration Date, or if this Lease is extended pursuant to
Section 29(a) hereof, on the last day of the last Extension Lease Term hereof
for which the Term of this Lease is renewed.
Section 4. Conditions Precedent Prior to Commencement of Basic Lease Term.
--------------------------------------------------------------
Unless otherwise waived in writing by the Owner or the Senior Lender, the
right of Lessee to lease the Leased Property from the Owner under this Lease is
subject to the fulfillment of each of the following conditions:
(a) The Lease and each of the other Transaction Documents shall have duly
authorized, executed and delivered by the parties thereto, in form and substance
satisfactory to the parties hereto, and shall be in full force and effect. No
Default or Event of Default shall exist under any of the Transaction Documents
(either before or after giving effect to the transactions contemplated by the
Transaction Documents), and the Owner, Senior Lender, Healthcare Realty, KCCI
and SELCO shall have received fully executed copies or originals of the
Transaction Documents. The Transaction Documents (or memoranda thereof), any
supplements thereto and any financing statements in connection therewith
required under the Uniform Commercial Code shall have been recorded, registered
and filed, if necessary, in such manner as to enable counsel to render the
opinions referred to in clause (c) below and to enable the title company to
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issue the title insurance policies referred to in clause (d) below;
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(b) All taxes, fees and other charges in connection with the execution,
delivery, recording, filing and registration of the Transaction Documents shall
have been paid or provisions for such payment shall have been made to the
satisfaction of the Owner;
(c) Counsel to the Lessee (i) in the jurisdiction in which the Leased
Property is located shall have issued to the Owner their opinions, all in form
and substance satisfactory to the Owner, (ii) shall have issued to the Owner its
opinion that the execution, delivery and performance of this Lease by Owner and
Lessee will not violate or result in a default under the Senior Loan Documents,
and (iii) shall have issued to the Owner, KCCI and SELCO its opinion to the
effect that upon delivery to the Custodian of the Certificates of Deposit and
the filing of the financing statements in the States of Ohio and Illinois, a
valid first priority security interest in the Supplemental Collateral shall have
been created and granted to the Owner and assigned to KCCI and SELCO;
(d) All approvals, consents, permits and licenses from every governmental
authority having jurisdiction of the Leased Property, the Seller, the Lessee
and/or the Owner required in connection with the purchase and sale of the Leased
Property from Seller to Owner, the leasing of
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the Leased Property by Owner to Lessee and the operation of the Leased Property
for its intended purposes (i.e. as an independent living facility for seniors)
shall have been obtained;
(e) No action or proceeding shall have been instituted, nor shall any
action or proceeding be threatened, before any U.S., state or local governmental
agency or authority, nor shall any order, judgment or decree have been issued or
proposed to be issued by any U.S., state or local governmental agency or
authority (i) to set aside, restrain, enjoin or prevent the full performance of
this Lease, any other Transaction Document or any transaction contemplated
hereby or thereby or (ii) which is reasonably likely to Materially and adversely
affect the Owner or the Lessee.
(f) The transactions contemplated herein and in the Transaction Documents
do not and will not violate any Legal Requirements;
(g) The Owner shall have received a "phase I" environmental assessment of
the Land and Improvements addressed to Senior Lender, Owner, SELCO, Healthcare
Realty and KCCI from a duly qualified environmental consultant acceptable to
Owner and such assessment shall have been performed in a manner which is
acceptable to Owner (and in any event such assessment shall have been performed
in accordance with all applicable 1997 ASTM standards). There shall be no event
or matter disclosed in the environmental assessment which presents a material
risk of the Leased Property, the Owner, the Lessee not being in compliance with
all Environmental Legal Requirements;
(h) The Owner and Senior Lender shall have received an appraisal of the
Leased Property in form and substance satisfactory to Owner and Senior Lender;
(i) Owner shall have received: (i) an owner's title insurance policy which
meets Owner's title insurance requirements previously furnished to Lessee and
which is to the satisfaction of Owner, Healthcare Realty and their respective
counsel; and (ii) a current, on-site instrument survey of the Land and
Improvements, which survey shall contain a certification thereon, or on a
separate surveyor's certificate, of a Registered Land Surveyor acceptable to
Owner which meets Owner's survey requirements previously furnished to Lessee and
which is to the satisfaction of Owner and its counsel;
(j) The Owner and Senior Lender shall have received evidence of insurance
with respect to the Leased Property required to be maintained pursuant to this
Lease, setting forth the respective coverages, limits of liability, carrier,
policy number and period of coverage, and otherwise satisfying the requirements
set forth in Section 15 hereof;
(k) Brookdale shall have executed and delivered to Senior Lender an
"Hazardous Substances Indemnity Agreement" and an "Indemnity and Guaranty
Agreement" in substantially the same form as the agreements of the same caption
delivered by Seller to the Original Lender;
(l) All conditions of Senior Lender to the assumption by Owner of the
Senior Loan shall have been satisfied; and
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(m) All other matters relating to the transaction contemplated by this
Lease shall be reasonably satisfactory to Owner, Senior Lender, SELCO,
Healthcare Realty and KCCI, and their respective counsel.
Section 5. Rental. Lessee shall pay the Base Rental and Additional Rental
------
to the Persons, in the amounts and at the times and in the manner set forth
below, such amounts constituting in the aggregate the total of the rental
payable under this Lease, as follows:
(a) Lessee hereby agrees to pay Base Rental to the Persons and in the
amounts determined in accordance with Exhibit B hereto and all Base Rental shall
be paid on or before such amounts are due and payable as set forth on Exhibit B.
(b) In addition to the Base Rental, Lessee agrees during the Term to pay
as Additional Rental to the Owner or the Person entitled to receive the same all
of the following:
(i) All "taxes or other impositions" (as defined in Section 8(a)
hereof), including any amounts payable by Owner to Senior Lender for payment in
the "Impound Account" under Section 1.6 of the Deed of Trust;
(ii) Insurance premiums, if any, on all insurance required to be
obtained and maintained in force and effect by Lessee under the provisions of
Section 15 of this Lease, including any amounts payable by Owner to Senior
Lender for payment in the "Impound Account" under Section 1.6 of the Deed of
Trust;
(iii) All other costs and expenses of every nature whatsoever incurred
by Lessee incident to the ownership, management, maintenance, repair,
replacement, restoration, and operation of the Leased Property, including any
amounts payable by Owner to Senior Lender for payment in the "Replacement
Reserve" under Section 1.8 of the Deed of Trust;
(iv) All indemnities, fees and expenses (not otherwise paid or
provided for out of the proceeds of the Owner's Equity) incurred by Owner or
which the Owner is obligated to pay in connection with the transactions
contemplated in this Lease or the Senior Loan;
(v) All amounts, liabilities and obligations which Lessee assumes or
agrees to pay hereunder to Owner or others, including, if any, payments of
indemnities, in addition to any other amounts due as Base Rental and Additional
Rental hereunder;
(vi) All indemnification payments or other amounts payable to the
Administrator or any of its employees hereunder or under the other Transaction
Documents and the customary fees and expenses payable to the Administrator for
administrative services rendered to Owner;
Amounts constituting Additional Rental payable pursuant to clauses
(i), (ii), (iii), (iv) and (vi) of this Section 5(b) shall be paid by Lessee
directly to the Person or Persons to whom such
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amounts are payable. The obligation of Lessee to pay all such amounts shall
survive the termination of this Lease.
(c) All payments of Base Rental and Additional Rental required to be made
by Lessee to Owner or Senior Lender shall be made by wire transfer of
immediately available funds. While the Senior Loan remains outstanding, all
payments of Base Rental constituting Senior Loan Debt Service shall be payable
directly to the Senior Lender as the Senior Lender may direct from time to time;
all payments of Base Rental constituting A Investor Loan Debt Service, B
Investor Loan Debt Service and SELCO Basic Rent shall be payable to the
Administrator. Notwithstanding the foregoing but subject to the terms of the
Indemnity Priority Agreement, each Indemnified Party shall be entitled to
exercise all of its Excepted Rights directly against Lessee.
Section 6. Use. Lessee shall use the Leased Property, including related
---
amenities, as a congregate care facility with assisted living services and shall
not cause or permit such use to be discontinued or abandoned, unless such use of
the Leased Improvements is or becomes a use prohibited by law.
Section 7. Net Lease; Nonterminability.
---------------------------
(A) THIS LEASE IS A "NET LEASE." ALL COSTS, EXPENSES AND OBLIGATIONS OF
EVERY KIND AND NATURE WHATSOEVER RELATING TO THE LEASED PROPERTY AND THE
APPURTENANCES THERETO AND THE USE AND OCCUPANCY THEREOF BY LESSEE OR ANYONE
CLAIMING BY, THROUGH OR UNDER LESSEE WHICH MAY ARISE OR BECOME DUE DURING OR
WITH RESPECT TO THE PERIOD CONSTITUTING THE TERM HEREOF SHALL BE PAID BY LESSEE,
AND LESSEE SHALL INDEMNIFY THE INDEMNIFIED PARTIES AGAINST ANY OF THE FOREGOING
AS PROVIDED IN SECTION 8 BELOW. LESSEE ASSUMES, DURING THE TERM OF THIS LEASE,
THE SOLE RESPONSIBILITY FOR THE CONDITION, USE, OPERATION, MAINTENANCE,
SUBLETTING AND MANAGEMENT OF THE LEASED PROPERTY, NEITHER OWNER NOR ANY OTHER
INDEMNIFIED PARTY SHALL HAVE ANY RESPONSIBILITY IN RESPECT THEREOF, NOR SHALL
OWNER NOR ANY OTHER INDEMNIFIED PARTY HAVE ANY LIABILITY FOR DAMAGE INCURRED BY
ANY PERSON OR FOR DAMAGE TO THE PROPERTY OF LESSEE OR ANY SUBLESSEE OF LESSEE
FOR ANY REASON WHATSOEVER. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
DURING THE TERM OF THIS LEASE, LESSEE SHALL PERFORM ALL OF THE OBLIGATIONS OF
THE SUBLESSOR UNDER ANY SUBLEASES AFFECTING ALL OR ANY PART OF THE LEASED
PROPERTY WHICH LESSEE MAY HEREINAFTER ENTER INTO AS SUBLESSOR TO THE EXTENT THAT
LESSEE'S FAILURE TO PERFORM SUCH OBLIGATIONS COULD RESULT IN THE OCCURRENCE OF
AN EVENT OF DEFAULT UNDER THIS LEASE. IN NO EVENT SHALL THE LESSEE BE LIABLE OR
BE HELD RESPONSIBLE FOR MISAPPLICATION OF ANY PAYMENTS RECEIVED BY THE OWNER (OR
THE ADMINISTRATOR) WHICH ARE TO BE PAID TO HEALTHCARE REALTY, KCCI AND/OR SELCO
AND LESSEE SHALL BE GIVEN CREDIT FOR ALL PAYMENTS MADE BY LESSEE TO OWNER (OR
THE ADMINISTRATOR) OF EQUITY RENTAL NOTWITHSTANDING FAILURE OF HEALTHCARE
REALTY, KCCI AND/OR SELCO TO RECEIVE SUCH PAYMENTS.
(B) LESSEE ACKNOWLEDGES AND AGREES THAT ITS OBLIGATIONS HEREUNDER,
INCLUDING, WITHOUT LIMITATION, ITS OBLIGATIONS TO PAY BASE RENTAL AND ADDITIONAL
RENTAL, SHALL BE UNCONDITIONAL AND IRREVOCABLE UNDER ANY AND ALL CIRCUMSTANCES
AND SHALL NOT BE SUBJECT TO CANCELLATION, TERMINATION, MODIFICATION OR
REPUDIATION BY LESSEE. THIS LEASE SHALL NOT TERMINATE, NOR SHALL LESSEE HAVE
ANY RIGHT TO TERMINATE THIS LEASE, AND LESSEE SHALL PERFORM ALL OBLIGATIONS
HEREUNDER, INCLUDING THE PAYMENT OF ALL BASE RENTAL AND ADDITIONAL RENTAL,
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WITHOUT NOTICE, DEMAND, COUNTERCLAIM, SET-OFF, DEDUCTION, DEFENSE OR RECOUPMENT,
AND WITHOUT ABATEMENT, SUSPENSION, DEFERMENT, DIMINUTION OR REDUCTION FOR ANY
REASON, INCLUDING, WITHOUT LIMITATION, ANY PAST, PRESENT OR FUTURE CLAIMS WHICH
LESSEE MAY HAVE AGAINST THE OWNER, SENIOR LENDER, SELCO, HEALTHCARE REALTY, KCCI
OR ANY OTHER PERSON FOR ANY REASON WHATSOEVER; ANY DEFECT IN THE LEASED PROPERTY
OR ANY PORTION THEREOF, OR IN THE TITLE, CONDITION, DESIGN, CONSTRUCTION,
HABITABILITY OR FITNESS FOR A PARTICULAR USE THEREOF; ANY DAMAGE TO OR
DESTRUCTION OR LOSS OF ALL OR PART OF THE LEASED PROPERTY; ANY RESTRICTION,
DEPRIVATION (INCLUDING EVICTION) OR PREVENTION OF, OR ANY INTERFERENCE WITH OR
INTERRUPTION OF, ANY USE OR OCCUPANCY OF THE LEASED PROPERTY (WHETHER DUE TO ANY
DEFECT IN OR FAILURE OF OWNER'S TITLE TO THE LEASED PROPERTY, ANY OWNER LIEN OR
OTHERWISE); ANY CONDEMNATION, REQUISITION OR OTHER TAKING OR SALE OF THE USE,
OCCUPANCY OR TITLE TO THE LEASED PROPERTY; ANY ACTION, OMISSION OR BREACH ON THE
PART OF THE OWNER UNDER THIS LEASE (INCLUDING WITHOUT LIMITATION, ANY BREACH OF
THE OWNER'S REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 12 HEREOF) OR
UNDER ANY OTHER AGREEMENT BETWEEN OWNER AND LESSEE, OR ANY OTHER INDEBTEDNESS OR
LIABILITY, HOWSOEVER AND WHENEVER ARISING, OF OWNER, ANY ASSIGNEE OR LESSEE TO
ANY OTHER PERSON, OR BY REASON OF INSOLVENCY, BANKRUPTCY OR SIMILAR PROCEEDINGS
BY OR AGAINST OWNER, ANY ASSIGNEE OR LESSEE; THE INADEQUACY OR INACCURACY OF THE
DESCRIPTION OF THE LEASED PROPERTY OR THE FAILURE TO DEMISE AND LET TO LESSEE
THE PROPERTY INTENDED TO BE LEASED HEREBY; LESSEE'S ACQUISITION OF OWNERSHIP OF
THE LEASED PROPERTY OR ANY SALE OR OTHER DISPOSITION OF THE LEASED PROPERTY; THE
IMPOSSIBILITY OR ILLEGALITY OF PERFORMANCE BY OWNER OR LESSEE OR BOTH; THE
FAILURE OF OWNER TO DELIVER POSSESSION OF THE LEASED PROPERTY ON THE CLOSING
DATE; ANY ACTION OF ANY COURT, ADMINISTRATIVE AGENCY OR OTHER GOVERNMENTAL
AUTHORITY; OR ANY OTHER CAUSE, WHETHER SIMILAR OR DISSIMILAR TO THE FOREGOING,
ANY PRESENT OR FUTURE LAW NOTWITHSTANDING; IT BEING THE INTENTION OF THE PARTIES
HERETO THAT ALL BASE RENTAL AND ADDITIONAL RENTAL PAYABLE BY LESSEE HEREUNDER
SHALL CONTINUE TO BE PAYABLE IN ALL EVENTS AND IN THE MANNER AND AT THE TIMES
HEREIN PROVIDED, WITHOUT NOTICE OR DEMAND, UNLESS THE OBLIGATION TO PAY THE SAME
SHALL BE TERMINATED PURSUANT TO THE EXPRESS PROVISIONS OF THIS LEASE.
(C) LESSEE WILL REMAIN OBLIGATED UNDER THIS LEASE IN ACCORDANCE WITH ITS
TERMS, AND WILL NOT TAKE ANY ACTION TO TERMINATE, RESCIND OR AVOID THIS LEASE
FOR ANY REASONS (OTHER THAN AS EXPRESSLY PROVIDED HEREIN), NOTWITHSTANDING ANY
BANKRUPTCY, INSOLVENCY, REORGANIZATION, LIQUIDATION, DISSOLUTION OR OTHER
PROCEEDING AFFECTING OWNER, OR ANY ASSIGNEE OF OWNER, OR ANY ACTION WITH RESPECT
TO THIS LEASE WHICH MAY BE TAKEN BY ANY RECEIVER, TRUSTEE OR LIQUIDATOR, OR ANY
ASSIGNEE OF OWNER OR BY ANY COURT IN ANY SUCH PROCEEDING. LESSEE WAIVES ALL
RIGHTS AT ANY TIME CONFERRED BY STATUTE OR OTHERWISE TO QUIT, TERMINATE OR
SURRENDER THIS LEASE OR THE LEASED PROPERTY (EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN SECTIONS 16 OR 29 HEREOF), OR TO ANY ABATEMENT, REDUCTION, DEFERMENT
OR SET-OFF OF ANY BASE RENTAL, ADDITIONAL RENTAL OR OTHER SUM PAYABLE BY LESSEE
HEREUNDER, FOR DAMAGE, LOSS OR EXPENSE SUFFERED BY LESSEE ON ACCOUNT OF ANY
CAUSE REFERRED TO IN THIS SECTION 7 OR OTHERWISE.
Section 8. Taxes and Other Charges; Laws and Agreements.
--------------------------------------------
(a) Lessee agrees to pay, defend and indemnify and hold each Indemnified
Party harmless on an after-tax basis from any and all Federal, state, local and
foreign taxes, fees, withholdings, levies, imposts, duties, assessments and
charges of any kind and nature whatsoever, including, without limitation, all
amounts payable hereunder as Additional Rental hereunder,
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together with any penalties, fines or interest thereon (herein called "taxes or
other impositions") attributable to any given period prior to or within the
Indemnification Period, howsoever imposed, whether levied or imposed upon or
asserted against Owner, Administrator, Senior Lender, SELCO, KCCI, Healthcare
Realty, any Assignee, Lessee, the Leased Property, or any portion thereof
(including, without limitation, taxes and assessments referred to in clause (i)
of Section 5(b) hereof) or any other Indemnified Party, by any Federal, state or
local government or taxing authority in the United States, or by any taxing
authority or governmental subdivision of a foreign country, upon or with respect
to (a) the Leased Property or any portion thereof (including, without
limitation, all fixtures, equipment and personal property which forms a part of
the Leased Property), (b) the acquisition, manufacture, construction, ordering,
purchase, ownership, delivery, leasing, subleasing, re-leasing, possession, use,
maintenance, registration, re-registration, titling, re-titling, licensing,
documentation, return, repossession, foreclosure, condemnation, conveyance,
assignment, sale or other application or disposition of the Leased Property or
any other portion thereof, (c) the rentals, receipts or earnings arising from
the Leased Property or other portion thereof, or (d) this Lease, the Base Rental
or Additional Rental payable by Lessee hereunder or any of the Transaction
Documents, provided, however, that the foregoing indemnity shall not apply to
and nothing in this Lease shall require the payment by the Lessee of (i) any
taxes or impositions based upon or measured solely by any Indemnified Party's
gross, net or taxable income, tax preferences or dividends paid or taxes payable
in the nature of capital gains, excess profits, accumulated earnings or personal
holding company taxes of such Indemnified Party, unless any such tax is in lieu
of or in substitute for any other taxes of such Indemnified Party or impositions
upon or with respect to the Leased Property which, if such other taxes or
impositions were in effect, would be payable by Lessee hereunder; (ii) any
franchise, estate, inheritance, succession, capital stock tax, unless any such
tax is in lieu of or in substitute for any other taxes of such Indemnified Party
or impositions upon or with respect to the Leased Property which, if such other
taxes or impositions were in effect, would be payable by Lessee hereunder; (iii)
any taxes of the Administrator imposed on or measured by the administrative fees
earned by such Persons in connection with the transaction contemplated herein;
(iv) any taxes of an Indemnified Party arising by reason of any voluntary
transfer of the Lease or Leased Property or part thereof other than (A) a
transfer by Owner pursuant to an exercise of remedies which are enforceable
after the occurrence of an Event of Default hereunder, (B) a transfer
constituting an Owner Conveyance hereunder; or (C) a subsequent transfer by the
Senior Lender or any nominee, designee or affiliate thereof if such entity
purchases the Leased Property at a foreclosure sale or accepts a deed-in-lieu of
foreclosure to the Leased Property, and (v) any taxes of an Indemnified Party
arising by reason of the voluntary transfer by SELCO, Healthcare Realty or KCCI
or any other Person holding an interest in Owner of its equity interests held in
Owner (other than voluntary transfers arising by reason of an Event of Default
hereunder). As used herein, the term "Indemnification Period" means the period
commencing on the Closing Date and ending on the date that the Owner or any
Assignee sells, transfers or otherwise conveys such Person's interest in and to
the Leased Property to the Lessee or a third person. Lessee will promptly notify
Owner of all reports or returns required to be made with respect to any tax or
other imposition with respect to which Lessee is required to indemnify
hereunder, and will promptly provide each of them with all information necessary
for the making and timely filing of such reports or returns by Owner. If Owner
requests that any such reports or returns be prepared and filed by Lessee,
Lessee will prepare and file the same with the relevant taxing authorities if
permitted by applicable law to file the same, and if not so permitted, Lessee
shall prepare such report or returns for signature by Owner, and shall forward
the same, together with immediately available funds for payment of any tax or
other
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<PAGE>
imposition due, to Owner, at least ten (10) days in advance of the date such
payment is due. Lessee shall be entitled to seek reimbursement for the payment
of such taxes from moneys held by the Senior Lender in the Impound Account in
the manner and to the extent permitted under the Deed of Trust. Upon written
request, Lessee shall furnish Owner with copies of all paid receipts or other
appropriate evidence of payment for all taxes or other impositions paid by
Lessee pursuant to this Section 8. All of the indemnities contained in this
Section 8 shall continue in full force and effect notwithstanding the expiration
or earlier termination of this Lease in whole or in part, including the
expiration or termination of the Term with respect to the Leased Property, and
are expressly made for the benefit of, and shall be enforceable by, Owner and
each Assignee.
(b) While the Senior Loan is outstanding, all taxes and impositions shall
be paid by Lessee in accordance with the Deed of Trust. Lessee shall, on
Owner's behalf, furnish the Senior Lender with receipts (or if receipts are not
immediately available, with copies of canceled checks evidencing payment with
receipts to follow promptly after they become available) showing payment of all
taxes and other impositions on the Leased Property at least fifteen (15) days
prior to the applicable delinquency date therefor. While the Senior Loan is
outstanding, the Lessee shall be entitled in good faith to contest validity,
applicability or amount of any asserted tax or other imposition provided that
the Lessee complies with all of the terms and conditions of Section 1.5 of the
Deed of Trust. If the Senior Loan is not outstanding, then Lessee shall be
entitled in good faith to contest validity, applicability or amount of any
asserted tax or other imposition in accordance with Section 8(d) below.
(c) Lessee shall, on Owner's behalf, comply with all of the Owner's
obligations to maintain the Impound Account pursuant to Section 1.6 of the Deed
of Trust. Lessee shall ensure the receipt by the Senior Lender, on or prior to
the respective due date under the Deed of Trust for payment thereof, of all
bills, invoices and statements for all taxes and other impositions, assessments
and insurance premiums to be paid from the Impound Account. All deficiencies in
the Impound Account shall be paid by Lessee when due in accordance with the Deed
of Trust and Lessee shall pay the other amounts due to the Senior Lender under
Section 1.6 of the Deed of Trust. Upon payment of the Senior Loan and provided
that no Default or Event of Default has occurred and is continuing hereunder,
the proceeds of the Impound Account, Replacement Reserve and any other reserve
accounts, if any, held by Senior Lender shall be remitted to Lessee and Lessee
shall be required to pay all taxes or other impositions to the applicable
governmental authorities prior to the date the same are due.
(d) After the Senior Loan has been paid in full and notwithstanding the
provisions of paragraph (a) of this Section 8 and the provisions of Section 9
and so long as no Default or Event of Default shall have occurred and is
continuing, Lessee shall have the right to contest, by appropriate legal
proceedings, any tax, charge, levy, assessment, Lien or other encumbrance
affecting the Leased Property, and to postpone payment of or compliance with the
same during the pendency of such contest, provided that (i) the commencement and
continuation of such proceedings shall suspend the collection thereof from, and
suspend the enforcement thereof against, the Person on whom such tax, charge,
levy, assessment or Lien or other encumbrance is sought to be imposed and/or the
Leased Property, (ii) no part of the Leased Property nor any Base Rental or
Additional Rental or other sums payable by Lessee hereunder shall be in danger
of being sold, forfeited, attached or lost, (iii) there shall not exist (x) any
interference with the use and occupancy of the Leased Property or any part
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thereof, or (y) any interference with the payment of Base Rental or any
Additional Rental (other than the portion subject to the contest), (iv) Lessee
shall promptly prosecute such contest to a final settlement or conclusion, or if
Lessee deems it advisable to abandon such contest, Lessee shall promptly pay or
perform the obligation which was the subject of such contest, (v) at no time
during the permitted contest shall there be a risk of the imposition of criminal
liability on Owner for failure to comply therewith; (vi) the amount of such
claim exceeds $15,000, (vii) the Lessee shall furnish Owner with written opinion
of independent legal counsel selected by Lessee and reasonably satisfactory to
Owner to the effect that there is a reasonable basis to contest such claim, and
(viii) the Lessee shall admit in writing to Owner and the other Indemnified
Parties that Lessee shall be liable for all costs and expenses which may be
incurred by any Indemnified Party in contesting such claim. If (i) any such
contest shall involve an amount of money or potential loss (including penalties
and similar charges) in excess of $250,000, or (ii) a Default or an Event of
Default shall have occurred and be continuing, then Lessee shall either (A)
deposit with the Owner an amount equal to 110% of the tax, charge, levy,
assessment, lien or other encumbrance (including penalties and interest charges)
affecting the Leased Property, or (B) post an equivalent bond for security
issued by a surety or other issuer reasonably acceptable to Owner and containing
such terms which are reasonably acceptable to Owner. Notwithstanding the
foregoing, (i) Lessee shall not postpone the payment of any such tax, charge,
levy, assessment or Lien for such length of time as shall permit the Leased
Property, or any lien thereon created by such item being contested, to be sold
or foreclosed by federal, state, county or municipal authority for the non-
payment thereof and (ii) Lessee shall not postpone compliance with any such law,
rule, order, ordinance, regulation or other governmental requirement if Owner
will thereby be subject to criminal prosecution, or if any municipal or other
governmental authority shall be in a position according to applicable law to
commence and carry out any action which would prevent compliance with the same
or to foreclose or sell any Lien which shall have arisen by reason of such
postponement or failure of compliance.
Section 9. Liens. Lessee represents and warrants that on the Closing
-----
Date, fee simple title in the Leased Property will be vested in Owner subject
only to Permitted Liens. Subject to the right to contest any claim or demand
for any work performed or materials delivered for the Leased Property pursuant
to Section 1.10 of the Deed of Trust or if the Senior Loan is not outstanding,
the right to contest set forth in Section 8(d) hereof, Lessee will pay, when
due, all claims and demands demand for any work performed or materials delivered
for the Leased Property. Lessee shall promptly, but in any event no later than
60 days after Lessee acquires actual knowledge of the filing thereof but in any
event prior to the enforcement of the same, at its own expense, remove and
discharge of record, by bond or otherwise, any charge, lien, security interest
or encumbrance upon the Leased Property, upon any Base Rental, or upon any
Additional Rental or other sums payable by Lessee under this Lease which arises
for any reason (except for Owner Liens) including all liens which arise out of
Lessee's possession, use, construction, operation and occupancy of the Leased
Property, but not including any Permitted Liens. Nothing contained in this
Lease shall be construed as constituting the consent or request of Owner,
express or implied, to or for the performance by any contractor, laborer,
materialman, or vendor of any labor or services or for the furnishing of any
materials for construction, alteration, addition, repair or demolition of or to
the Leased Property or any part thereof. Notice is hereby given that Owner will
not be liable for any labor, services or materials furnished or to be furnished
to Lessee, or to anyone holding an interest in the Leased Property or any part
thereof by, through or under Lessee, and that no mechanic's or other liens for
any such labor, services or materials shall attach to or affect the interest of
Owner in and to the Leased Property.
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<PAGE>
Lessee shall notify Owner in writing at least fifteen (15) days prior to
commencing any work on the Leased Property in order to enable the Owner to file
and post a notice of nonresponsibility. In the event of the failure of Lessee to
discharge any charge or Lien within the time period set forth above and
otherwise as aforesaid, except during the pendency of any contest permitted and
conducted pursuant to Section 1.10 of the Deed of Trust or Section 8(d) hereof
(if the Senior Loan is not outstanding), Owner may (but shall not be required
to) discharge such items by payment or bond or both, and Lessee will repay to
Owner, upon demand, any and all amounts paid therefor, or by reason of any
liability on such bond, and also any and all reasonable incidental expenses,
including reasonable attorney's fees, incurred by Owner in connection therewith.
Section 10. Ownership of the Leased Property.
--------------------------------
(a) The Owner and the Lessee intend that (i) for financial accounting
purposes with respect to the Lessee, this Lease will be treated as an "operating
lease" pursuant to Statement of Financial Accounting Standards No. 13, as
amended, but (ii) for federal and all state and local income tax purposes, (A)
this Lease will be treated as a financing arrangement, (B) the Senior Lender and
Owner will each be deemed a lender having made or making a loan for the benefit
of the Lessee, which loan is secured by all of the Leased Property, and (C) the
Lessee will be treated as the owner of all of the Leased Property and will be
entitled to all tax benefits ordinarily available to an owner of a property
similar to the Leased Property for such tax purposes. Owner shall take no
action inconsistent with such intent for tax purposes, provided that nothing in
this Section 10(a) shall deemed to restrict the Owner's right to exercise any
remedies after the occurrence and during the continuance of an Event of Default.
If, notwithstanding the income tax intentions of the parties as set forth
herein, the Owner actually receives any income tax deduction, reduction in
income tax or other income tax benefits as a result of any claim for, or
recharacterization requiring the Owner to take, any tax benefits attributable to
ownership of the Leased Property for federal income tax purposes, the Owner
shall pay to the Lessee the amount of such income tax savings actually realized
by the Owner (less the amount of any anticipated increase in income tax which
the Owner determines is payable as a result of such claim or
recharacterization); provided that the Lessee shall agree to reimburse the Owner
for any subsequent increase in the Owner's income taxes resulting from such
claim or recharacterization not taken into account in the payment made to Lessee
by the Owner. The parties agree that this Section 10(a) is intended to require
a payment to the Lessee if and only if the Owner shall have actually received
an unanticipated tax savings with respect to the Leased Property that would not
have been received if the Owner had advanced funds to the Lessee in the form of
one or more loans secured by the Leased Property in an aggregate amount equal to
the Termination Value. Nothing in this Section 10(a) shall be construed to
require the Owner to take any affirmative action to realize any tax savings if
in its good faith judgment such action may have a material adverse effect on
Owner, Senior Lender, SELCO, Healthcare Realty or KCCI.
(b) It is the intent of the parties here to that the obligations of the
Lessee under this Lease to pay Base Rental and Supplemental Rental, End of Term
Adjustment, Termination Value or Purchase Price on the Termination Date, shall
be treated as payments of interest on and principal of, respectively, loans from
Owner to Lessee. Specifically, without limiting the generality of the
foregoing, the Owner and Lessee intend and agree that with respect to the nature
of the transactions evidenced by this Lease in the context of the exercise or
remedies under the Transaction Documents, including without limitation, in the
case of any insolvency or receivership proceedings or any
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petition under the United States bankruptcy laws or any other applicable
insolvency laws or statute of the United States of America or any state thereof
affecting Owner and Lessee, or the enforcement or collection actions, the
transactions evidenced hereby are loans by the Owner to the Lessee as unrelated
third party lender to the Lessee.
(c) This Lease is a lease intended as security. Lessee hereby grants to
Owner (and Owner agrees to assign to Senior Lender) a security interest in all
of the Lessee's right, title and interest in and to the Leased Property
(including, without limitation, all site improvements, base building, building
systems, equipment and related fixtures now or hereafter existing on the Land
and all furniture, equipment, furnishings, goods, equipment, inventory or
personal property acquired from Seller and used in connection with the Leased
Property), together with any substitutions, replacements and additions thereto,
all of the Lessee's rights in and to all leases, subleases, occupancy agreements
or other rights to occupy the Leased Property entered into or assumed by Lessee
and to all general intangibles related to the Leased Property and all of
Lessee's rights, claims and damages arising from warranties (whether express or
implied) of architects, contractors and subcontractors with respect to the
development and construction of the Improvements, and all proceeds of the
conversion, voluntary or involuntary, of the foregoing into cash, investments,
securities or other property, whether in cash, investments, securities or other
property. The Owner and the Lessee shall, to the extent consistent with this
Lease, take such actions and execute, deliver, file and record such other
documents, financing statements, mortgages and deeds of trust as may be
necessary to ensure that, if this Lease were deemed to create a security
interest in the Leased Property in accordance with this Section 10, such
security interest would be deemed to be a perfected security interest of first
priority under applicable federal, state and local law, subject only to
Permitted Liens, and will be maintained as such throughout the Term.
Section 11. Owner's Disclaimer; Acknowledgment by Lessee. The Leased
--------------------------------------------
Property is demised and let in its present condition without representation and
warranty by Owner subject to (i) Permitted Liens, (ii) the rights of parties in
possession, (iii) the state of title transferred to Owner on the Closing Date
pursuant to the P&S, (iv) any state of facts which an accurate survey or
physical inspection might show, (v) the existing environmental condition of the
Leased Property, (vi) all applicable laws, rules, regulations, ordinances and
restrictions, including, without limitation, all Environmental Legal
Requirements, now in effect or hereafter adopted by any governmental authority
having jurisdiction, and (vii) any violation of such laws, rules, regulations,
ordinances and restrictions occurring on or before the Closing Date. Lessee has
examined the Leased Property and the Owner's title and interest thereto and has
found as between Lessee and Owner (and each Person claiming by, through or under
Owner) the same to be satisfactory for all purposes.
OWNER HAS NOT MADE AN INSPECTION OF THE LEASED PROPERTY AND MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED
PROPERTY OR ANY PORTION THEREOF OR THE LOCATION, USE, DESCRIPTION, DESIGN,
MERCHANTABILITY, HABITABILITY, ENVIRONMENTAL CONDITION, COMPLIANCE WITH
SPECIFICATIONS, CONDITION, OPERATION, ABSENCE FROM DEFECTS (PATENT OR LATENT),
DURABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE LEASED PROPERTY OR ANY
PORTION THEREOF; AND ALL RISKS INCIDENTAL TO THE LEASED PROPERTY SHALL BE BORNE
BY THE LESSEE AND THE OWNER SHALL HAVE NO RESPONSIBILITY WITH RESPECT
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<PAGE>
THERETO. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IN THE EVENT OF ANY
DEFECT OR DEFICIENCY OF ANY NATURE IN THE LEASED PROPERTY OR ANY PORTION
THEREOF, WHETHER PATENT OR LATENT, WHETHER DISCOVERABLE BY LESSEE, OWNER SHALL
NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY DIRECT
OR INDIRECT DAMAGE TO PERSONS OR PROPERTY RESULTING THEREFROM, OR FOR LESSEE'S
LOSS OF USE OF THE LEASED PROPERTY, OR ANY PORTION THEREOF, OR FOR ANY
INTERRUPTION IN LESSEE'S BUSINESS CAUSED BY LESSEE'S INABILITY TO USE THE LEASED
PROPERTY, OR ANY PORTION THEREOF, FOR ANY REASON WHATSOEVER. THE PROVISIONS OF
THIS SECTION 11 HAVE BEEN NEGOTIATED BY LESSEE AND OWNER AND ARE INTENDED TO BE
A COMPLETE EXCLUSION AND DISCLAIMER BY OWNER OF ANY AND ALL WARRANTIES BY OWNER
WITH RESPECT TO THE LEASED PROPERTY OR ANY PORTION THEREOF, WHETHER EXPRESS OR
IMPLIED, AND WHETHER ARISING UNDER THE UNIFORM COMMERCIAL CODE, ANY OTHER
APPLICABLE LAW OR OTHERWISE. LESSEE REPRESENTS AND WARRANTS TO OWNER THAT THE
PROVISIONS OF THIS SECTION 11 ARE ENFORCEABLE BY OWNER AGAINST LESSEE (AND THOSE
CLAIMING BY, THROUGH OR UNDER LESSEE) AND THAT OWNER SHALL NOT HAVE ANY
LIABILITY FOR ANY OF THE MATTERS SUBJECT TO THIS DISCLAIMER.
WITH RESPECT TO THE EXCULPATION PROVIDED IN THIS SECTION 11, LESSEE WAIVES
THE BENEFITS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
Section 12. Representations of Parties.
--------------------------
Lessee hereby represents and warrants to and covenants with Owner that as
of the Closing Date and at all times during the Term as follows:
(a) Lessee is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to own its properties and to conduct its business as currently
conducted.
(b) Lessee is qualified to do business as a foreign corporation and is in
good standing in the State of California.
(c) Lessee has the requisite power and authority to enter into this Lease
and the Transaction Documents to which it is a party and to carry out and
perform the obligations of Lessee under the terms hereof and thereof.
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<PAGE>
(d) The execution, delivery and performance by Lessee of this Lease and
the Transaction Documents to which it is a party have been duly authorized by
all the necessary corporate action of Lessee and do not (A) violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award applicable to Lessee, (B) result in a breach of
or constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which Lessee or Lessee's Parent is a
party or by which either of them or their respective properties are bound, which
would have, in the case of Lessee's Parent, a Material adverse effect or (C)
result in, or require, the creation or imposition of any Lien, except as herein
contemplated. Neither Lessee nor Lessee's Parent is in violation of or in
default under any such Legal Requirements or any such indenture, agreement,
lease or instrument described in this paragraph which would have a Material
adverse effect.
(e) The Lease and the Transaction Documents to which Lessee is a party
have been duly executed and delivered by Lessee and constitute the legal, valid
and binding obligations of Lessee enforceable against Lessee in accordance with
their terms, including, without limitation, the choice of laws provisions
therein except as such enforceability may be affected by applicable bankruptcy
or insolvency laws, or laws affecting the enforcement of creditor's rights or
remedies generally or by general principles of equity.
(f) Neither the execution and delivery of this Lease, nor the payment and
performance by Lessee of all of its obligations hereunder, require the consent
or approval of, the giving of notice to, or the registration, filing or
recording with, or the taking of any other action in respect of, any Federal,
state, local or foreign government or governmental authority or agency or other
Person other than the recording of a Memorandum of Lease.
(g) All balance sheets, statements of profit and loss and other financial
data that have been delivered to Owner and Senior Lender with respect to
Lessee's Parent (A) are complete and correct in all material respects, (B)
accurately present the financial condition of Lessee's Parent on the dates for
which, and the results of its operations for the periods for which, the same
have been furnished, and (C) have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
covered thereby, and there has been no material adverse change in the condition
of Lessee or Lessee's Parent, financial or otherwise, since the date of the most
recent financial statements delivered to Owner with respect to Lessee's Parent;
(h) Except as otherwise stated in Schedule I (the "Listed Permits"),
Lessee holds all licenses, certificates and permits (including any applicable
environmental permits) from governmental authorities necessary to occupy and use
the Leased Property for its intended purposes as a congregate care facility with
assisted living services. All such licenses, certificates and permits will
remain in full force and effect and be complied with in all respects.
(i) No litigation or administrative proceedings of or before any court,
tribunal or governmental body is pending, or, to the knowledge of Lessee,
threatened against Lessee or any of its properties or with respect to this Lease
which, if adversely determined, would have a material adverse effect on the
business, assets or financial condition of Lessee or upon its right to enter
into this Lease or the validity or effectiveness thereof.
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<PAGE>
(j) Lessee is not in default in the payment or performance of any of its
obligations of any contract, agreement or other instrument to which it is a
party or by which it or any of its assets may be bound and which will continue
to exist subsequent to the date hereof.
(k) The Leased Property is not subject to any Lien, except for this Lease,
the Deed of Trust and the other Permitted Liens.
(l) Lessee has not incurred or become liable for any broker's commission
or finder's fee relating to or in connection with the transaction contemplated
in this Lease or the other Transaction Documents.
(m) Lessee will not, during the entire term of this Lease, engage in any
business other than the business of leasing and operating the Leased Property
and will not incur any debts other than the debts contemplated in the
Transaction Documents and debts incurred to satisfy and discharge such debts and
debts representing trade payables to vendors and suppliers which are incurred in
the ordinary course of Lessee's business in operating the Leased Property.
Owner hereby represents and warrants to and covenants with Lessee that as
of the Closing Date and at all times during the Term as follows:
(a) Owner is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware, with full
corporate power and authority to own its properties and to conduct its business
as currently conducted.
(b) Owner is qualified to do business as a foreign limited liability
company and is in good standing in the State of California.
(c) Owner has the requisite power and authority to enter into this Lease
and the Transaction Documents to which it is a party and to carry out and
perform the obligations of Lessee under the terms hereof and thereof.
(d) The execution, delivery and performance by Owner of this Lease and the
Transaction Documents to which it is a party have been duly authorized and do
not (A) violate any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to Owner, (B)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which Owner is a
party or by which it or its properties are bound, or (C) result in, or require,
the creation or imposition of any Lien, except as contemplated herein. Owner is
not in violation of or in default under any Legal Requirement or any such
indenture, agreement, lease or instrument described in this paragraph.
(e) The Lease and the Transaction Documents to which Owner is a party have
been duly executed and delivered by Owner and constitute the legal, valid and
binding obligations of Owner enforceable against Owner in accordance with their
terms, including, without limitation, the choice of laws provisions therein
except as such enforceability may be affected by applicable bankruptcy or
insolvency laws, or laws affecting the enforcement of creditor's rights or
remedies generally or by general principles of equity.
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<PAGE>
(f) Neither the execution and delivery of this Lease, nor the performance
by Owner of all of its obligations hereunder, requires the consent or approval
of, the giving of notice to, or the registration, filing or recording with, or
the taking of any other action in respect of, any Federal, state, local or
foreign government or governmental authority or agency or other Person other
than the recording of a Memorandum of Lease.
(g) No litigation or administrative proceedings of or before any court,
tribunal or governmental body is pending, or, to the knowledge of Owner,
threatened against Owner or any of its properties or with respect to this Lease
which, if adversely determined, would have a material adverse effect on the
business, assets or financial condition of Owner or upon its right to enter into
this Lease or the validly or effectiveness thereof.
(h) Owner has not contracted with a broker or a finder relating to or in
connection with the transactions contemplated in this Lease or the other
Transaction Documents.
(i) Owner will not, during the entire Term, engage in any business other
than the business of owning the Leased Property and will not incur any debts
other than the debts contemplated in the Transaction Documents and debts
incurred to satisfy and discharge such debts.
(j) Unless a Default or Event of Default has occurred and is continuing
hereunder, Owner will not amend, modify or supplement the Senior Loan Documents
without the prior written consent of the Lessee, which will not be unreasonably
withheld, delayed or conditioned.
Section 13. Maintenance; Quiet Enjoyment.
----------------------------
(a) In addition to the other covenants contained in this Lease, Lessee
hereby further covenants and agrees that during the Term of this Lease:
(i) Lessee represents that all Improvements are in good condition,
repair and appearance. Subject to Owner's and Lessee's rights under Section 16
hereof, Lessee shall, at its cost and expense, keep and maintain the
Improvements, including any altered, rebuilt, additional or substituted
buildings, structures and other improvements thereto, in the same condition as
on the Basic Term Commencement Date, ordinary wear and tear excepted, and on a
basis consistent with the operation and maintenance of congregate care
facilities with assisted living services and other uses permitted under Section
6 hereof, as the case may be, comparable in style and location to the Leased
Property and in no event less than the standards applied by Lessee or its
Affiliates in the operation of other comparable properties owned or leased by
Lessee or its Affiliates. Lessee will make all structural and nonstructural,
and ordinary and extraordinary changes, repairs and replacements, foreseen or
unforeseen, which may be required, whether or not caused by its act or omission,
to be made upon or in connection with the Improvements in order to keep the same
in such condition, including taking, or causing to be taken, action necessary to
maintain the Leased Property in compliance with the provisions of any insurance
policy with respect to the Leased Property and any applicable Legal
Requirements, including all applicable Environmental Legal Requirements. Lessee
shall provide or cause to be provided all security service, custodial service,
janitorial service and other services necessary for the proper upkeep and
maintenance of the Leased Property.
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Without limiting the generality of the foregoing, the Lessee, on behalf of the
Owner, shall comply with the provisions of Section 1.8 of the Deed of Trust,
including (x) the maintenance of the Replacement Reserve and the payment of the
required monthly deposit thereto and the payment of any deficiencies, and (y)
the obligation to make repairs which an annual inspection of the Leased Property
show are needed. Owner hereby directs and authorizes Lessee and Lessee hereby
agrees to seek reimbursement for any costs incurred to repair the Leased
Property from amounts maintained by the Senior Lender in the Replacement
Reserve, provided that the Lessee will comply with all of the terms and
conditions set forth in Section 1.8 of the Deed of Trust relating to the payment
of such costs from the Replacement Reserve. If required by Senior Lender, Owner
shall join with Lessee in any requests made to Senior Lender for reimbursement
from the Replacement Reserve provided that Lessee (and Lessee's Parent) shall
indemnify and hold harmless Owner and each of the other Indemnified Parties for
any loss, damages, claims, expenses or liabilities incurred by Owner or any
Indemnified Party by reason of joining in such request.
(ii) Lessee covenants to perform or observe all terms, covenants or
conditions of any Permitted Liens, including, without limitation, the Deed of
Trust, and any easement or maintenance agreements to which it may at any time be
a party or to which the Leased Property or any portion thereof is subject at any
time or any other like matters which now or hereafter affect the Leased
Property, the Owner, the Lease or any one of the foregoing. Lessee shall, at
its expense, use its reasonable efforts, consistent with sound business
practice, to enforce compliance with any Permitted Liens, easement, or
maintenance agreements or similar agreements benefiting the Leased Property or
any portion thereof by any other Person subject to such agreement, provided,
however, that if a failure to comply with any of the foregoing would adversely
affect the utility, fair market value or useful life of the Leased Property, the
Lessee shall enforce compliance with the same. Lessee expressly waives the
right to make repairs at the expense of the Owner pursuant to any law at any
time in effect that would impose any such obligations on a lessor or give any
such rights to a lessor. Lessee shall not abandon the Leased Property or any
portion thereof or commit waste thereon.
(iii) If any Improvements situated on the Leased Property at any time
during the Term of this Lease shall encroach upon any property, street or right-
of-way adjoining or adjacent to the Leased Property, or shall violate the
agreements or conditions contained in any restrictive covenant affecting the
Leased Property or any part thereof, or shall impair the rights of others under
or obstruct any easement or right-of-way to which the Leased Property is
subject, then, promptly after the written request of Owner or any Person
affected by any such encroachment, violation, impairment or obstruction, Lessee
shall, at its expense, either (A) obtain affirmative insurance from the Title
Company insuring Owner and/or Senior Lender against any losses or damages
occasioned thereby, the form of said affirmative insurance to be satisfactory to
Owner and Senior Lender in their sole discretion exercised independently, (B)
obtain effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation, impairment or obstruction
whether the same shall affect Owner, Senior Lender, SELCO, Healthcare Realty,
KCCI, the Administrator or any one or more of the foregoing, or (C) make such
changes in the Improvements on the Leased Property and take such other action as
shall be necessary to remove such encroachments or obstructions and to end such
violations or impairments, including, if necessary, the alteration or removal of
any Improvement on the Leased Property. Any such alteration or removal shall be
made in conformity with the requirements of Section 17 to the same extent as if
such
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alteration or removal were an alteration under Section 17 of this Lease and
there shall be no abatement of Basic Rental or Additional Rental by reason of
such alteration or removal.
(iv) Owner shall have no obligation to incur any expense of any kind
or character in connection with the management, operation or maintenance of the
Leased Property during the Term of this Lease. Owner shall not be required at
any time to make any improvements, alterations, changes, additions, repairs or
replacements of any nature whatsoever in or to the Leased Property and so long
as no Event of Default shall have occurred and is continuing, Owner shall not
make any improvements, changes, additions, repairs or replacements of any nature
in or on the Leased Property without the prior written consent of Lessee.
Lessee shall use and operate the Leased Property or cause it to be used and
operated only by personnel authorized by Lessee, and Lessee shall use reasonable
precautions to prevent loss or damage to the Leased Property from fire and other
hazards.
(v) Lessee shall pay all charges for utility, communication and other
services on or about the Leased Property, whether or not payment therefor shall
become due after the Term of this Lease.
(vi) Other than the provisions of Section 13(b) hereof, Lessee shall
perform all covenants and agreements (except for those covenants and agreements
which are by their express terms capable of being, or specifically required to
be, performed by Owner acting alone) which it and/or Owner agree to perform
under the Senior Loan Documents and the other Transaction Documents.
(b) Owner hereby covenants and agrees that during the Term of this Lease
it shall not take any affirmative action which will interfere with the quiet use
and enjoyment of the Leased Property by Lessee, unless such interference arises
out of an Event of Default by Lessee. Owner further covenants and agrees that,
so long as no Event of Default shall have occurred and be continuing or would
result therefrom and provided that Lessee shall bear all associated costs and
provided further that the Senior Lender consents, it shall take all reasonably
necessary actions as owner of the Leased Property to grant and/or to convey such
necessary easements or rights of passage over the Leased Property or enter into
such agreements as may be necessary or desirable to enable the Lessee to operate
the Leased Property for the uses permitted under Section 6 hereof provided, that
no such agreements shall impose any Material liabilities on the Owner.
Section 14. Compliance with Legal Requirements. Lessee shall at all
----------------------------------
times, at Lessee's own cost and expense, perform and comply with all laws,
rules, orders, ordinances, regulations and requirements now or hereafter enacted
or promulgated, of every government and municipality having jurisdiction over
the Leased Property and of any agency thereof, relating to the Leased Property,
or the Improvement, or the facilities or equipment thereon or therein, or the
streets, sidewalks, vaults, vault spaces, curbs and gutters adjoining the Leased
Property, or the appurtenances to the Leased Property, or the franchise and
privileges connected therewith (collectively, "Legal Requirements"), whether or
not such Legal Requirements so involved shall necessitate structural changes,
improvements, interference with use and enjoyment of the Leased Property,
replacements or repairs, extraordinary as well as ordinary, and Lessee shall so
perform and comply, whether or not such Legal Requirements shall now exist or
shall hereafter be enacted or
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promulgated, and whether or not such Legal Requirements can be said to be within
the present contemplation of the parties hereto. Lessee shall, at its expense,
comply with all provisions of insurance policies required pursuant to Section 15
hereof, and with the provisions of all Material Permitted Liens and all Material
contracts, agreements, instruments and restrictions existing at the commencement
of this Lease or thereafter suffered or permitted by Lessee, affecting the
Leased Property or any part thereof or the ownership, occupancy, use, operation
or possession thereof. Lessee shall at all times comply with the terms of and
perform its obligations under any assignment to Senior Lender of this Lease and
any consent of Lessee to such assignment.
Notwithstanding the foregoing provisions of this Section 14 and so long as
no Event of Default shall have occurred and be continuing, Lessee shall have the
right to contest by appropriate legal proceedings, any order or other direction
issued by any federal, state or local governmental agency which order or
direction affects the Lessee or the Leased Property, and to postpone compliance
with the same during the pendency of such contest, provided that (i) while the
Senior Loan is outstanding, such contest is made in accordance with the terms
and provisions of Section 1.24 of the Deed of Trust, (ii) the commencement and
continuation of such proceedings shall suspend the enforcement of such order or
direction, (iii) no part of the Leased Property nor any Base Rental or
Additional Rental or other sums payable by Lessee hereunder shall be in danger
of being sold, forfeited, attached or lost, (iv) there shall not exist (x) any
unreasonable interference with the use or occupancy of the Leased Property or
any part thereof, or (y) any interference with the payment of Base Rental or
Additional Rental (v) Lessee shall promptly prosecute such contest to a final
settlement or conclusion, or if Lessee deems it advisable to abandon such
contest, Lessee shall promptly pay or perform the obligation which was the
subject to such contest, and (vi) at no time during the permitted contest shall
there be a risk of the imposition of criminal liability on Owner for failure to
comply therewith. If (i) any such contest shall involve an amount of money, or
potential loss (including penalties and similar charges) in excess of $250,000,
or (ii) an Event of Default shall have occurred and be continuing, then Lessee
shall either (A) deposit with the Owner an amount equal to 110% of the amount of
money or potential loss involved in such contest (including any penalties and
interest) or (B) post an equivalent bond for security (provided any security for
such bond shall be junior in right and interest to any security required by
Senior Lender under Section 1.24 of the Deed of Trust) issued by a surety or
other issuer reasonably acceptable to Owner and containing such terms which are
reasonably acceptable to Owner. In no event shall Lessee postpone the payment
or performance of the order or direction for such length of time as shall permit
the Leased Property, or any lien thereon created by such order or direction
being contested, to be sold or foreclosed by any federal, state, county or
municipal authority for the nonpayment or nonperformance thereof. Lessee shall
not postpone compliance with any such order or direction if Owner will thereby
be subject to criminal prosecution, or if any governmental authority shall be in
a position according to applicable law to commence or carry out any action which
would then prohibit compliance with same or to foreclose or sell any lien
affecting all or a part of the Leased Property which shall have arisen by reason
of such postponement or failure of compliance.
Section 15. Insurance. Lessee shall during the Term of this Lease obtain
---------
and maintain or cause to be obtained and maintained at all times the following
insurance:
(a) "All-risk" coverage insurance against loss or damage to the
Leased Property from all-risk perils. The amount of such insurance shall be
not less than one hundred percent
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(100%) of the full replacement costs of the Improvements, furniture,
furnishings, fixtures, equipment and other items (whether personalty or
fixtures) included in the Leased Property and owned by Owner or Lessee from
time to time, without reduction for depreciation. The determination of the
replacement cost shall be adjusted annually to comply with the requirements
of the insurer issuing such coverage or in accordance with such indices,
appraisals or information as Senior Lender determines in accordance with
Section 1.4 of the Deed of Trust. Full replacement cost, as used herein,
means, with respect to the Improvements, the cost of replacing the
Improvements without regard to depreciation, exclusive of the cost of
excavations, foundations and footings below the lowest basement floor, and
means, with respect to such furniture, fixtures, equipment and other items,
the cost of replacing the same. Each policy shall contain a replacement
cost endorsement and either an agreed amount endorsement (to avoid
operation of any co-insurance provisions) or a waiver of any co-insurance
provisions and shall comply with all of the Senior Lender's requirements.
(b) Commercial general liability insurance for personal injury, bodily
injury, death and property damage liability in amounts not less than
$5,000,000 per occurrence and $10,000,000 aggregate (inclusive of umbrella
coverage) combined single limit for bodily injury, personal injury and
property damage. This policy must contain, but not be limited to, coverage
for premises and operations liability, products and completed operations
liability, contractual liability, hired and non-owned automobile liability,
personal injury liability and property damage liability. During any
construction on the Land, the Lessee's general contractor for such
construction shall also provide the insurance required under this Section
15(b). The Lessee agrees to increase the amount of said liability
insurance at the request of the Senior Lender made in accordance with
Section 1.4 of the Deed of Trust.
(c) Insurance covering the major components of the central heating,
air conditioning and ventilating systems, boilers, other pressure vessels,
high pressure piping and machinery, elevators and escalators, if any, and
any other similar equipment installed in the Improvements, in an amount
equal to one hundred percent (100%) of the full replacement cost of the
Improvements which policies shall insure against physical damage to and
loss of occupancy and use of the Improvements arising out of accident or
breakdown covered thereunder.
(d) If any portions of the Leased Property is now or hereafter located
in an area designated by the Secretary of Housing and Urban Development as
having special flood hazards (including, without limitation, those areas
designated as Zone A or Zone V), flood insurance in an amount equal to one
hundred percent (100%) of the replacement cost of the Improvements or the
maximum available amount, which ever is lesser.
(e) During any period of any construction on the Land or renovation or
alteration of the Improvements, a so-called "Builder's All-Risk Completed
Value" or "Course of Construction" insurance policy in non-reporting form
for any Improvements under construction, renovation or alteration in an
amount approved by Owner and Senior Lender and worker's compensation
insurance covering all persons engaged in such construction, renovation or
alteration.
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(f) Workers' compensation insurance issued by a responsible carrier
authorized under the laws of the State of California to insure employers
against liability for compensation or in lieu thereof, such workers'
compensation insurance to cover all persons employed by Lessee in
connection with the Leased Property and to cover full liability for
compensation under any such act aforesaid.
(g) Business interruption insurance covering loss of use, total or
partial, of any part of the Leased Property in an amount sufficient at all
times to pay the total Base Rental and Additional Rental payable under this
Lease with respect to the Leased Property for a period adequate to cover
the period of loss of use of any part of the Leased Property. Such policy
shall provide that the amount payable thereunder shall not be less than an
amount equal to one (1) year's Base Rental and Additional Rental.
(h) Such other insurance coverages in such amounts as the Owner or
Senior Lender may require against insurable hazards or casualties which at
the time are commonly insured against in case of property similarly
situated, due regard being given to the height and type of buildings, their
construction, location, use and occupancy.
All such insurance shall (i) be with insurers authorized to do business in
the State of California and who have and maintain a rating of at least the third
(3rd) highest rating category by Moody's, DCR, Fitch or S&P or a Best Insurance
Guide rating of "A-VIII" or better (such choice of rating to be at the Senior
Lender's election while the Senior Loan is outstanding, then shall be at Owner's
election), (ii) contain a complete address of the Land (or a legal description
thereof), (iii) be for terms of at least one (1) year, (iv) contain deductibles
no greater than $10,000 or such other amount approved by Senior Lender and
Owner, and (v) be subject to the approval of the Senior Lender and the Owner as
to insurance companies, amounts, content, forms of policies, method by which
premiums are paid and expiration dates.
The Lessee shall as of the date hereof deliver to Owner and Senior Lender
evidence that said insurance policies have been paid current as of the Closing
Date and certified copies of such insurance policies and original certificates
of insurance signed by an authorized agent evidencing such insurance
satisfactory to Owner and Senior Lender. Lessee shall renew all such insurance
and deliver to Owner and Senior Lender certificates evidencing such renewals at
least thirty (30) days before any such insurance shall expire. Without limiting
the required endorsements to insurance policies, Lessee further agrees that all
such policies and any other policies covering the Leased Property or any portion
thereof, whether or not required or requested by Owner or Senior Lender, shall
provide that the proceeds are payable to Senior Lender, its successors and
assigns, pursuant and subject to a mortgagee clause (without contribution) of
standard form attached to, or otherwise made a part of, the applicable policy.
All policies of property insurance provided for therein shall name the Owner as
insured, and all liability policies shall name the Owner, Senior Lender, SELCO,
Healthcare Realty, KCCI and Administrator as additional insureds, as their
interests may appear.
Lessee further agrees that all such insurance policies and any other
policies covering the Leased Property or any portion thereof, whether or not
required or requested by Senior Lender: (i) shall provide for at least thirty
(30) days' prior written notice to Owner and Senior Lender prior to
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any cancellation or termination thereof and prior to any modification thereof
which affects the interest of Owner or Senior Lender, (ii) shall contain an
endorsement or agreement by the insurer that any loss shall be payable to Senior
Lender (or Owner, if the Senior Loan is not outstanding) in accordance with the
terms of such policy notwithstanding any act or negligence of Owner (except if
such amounts are payable to Owner) or Lessee which might otherwise result in
forfeiture of such insurance, and (iii) shall waive all rights of subrogation
against the Senior Lender and Owner. If Lessee fails to maintain the insurance
required hereby and Senior Lender (or Owner) procures such insurance pursuant to
Section 1.4 of the Deed of Trust, the Lessee shall timely pay all amounts
becoming due to Senior Lender under the Deed of Trust resulting therefrom.
In the event of the foreclosure of the Deed of Trust, or other transfer of
title to the Leased Property in extinguishment in whole or in part of the Senior
Loan, all right, title, and interest of Owner and Lessee in and to all proceeds
payable under the policies of insurance required under this Section 15 shall
thereupon vest in the purchaser at such foreclosure sale, or in Senior Lender or
other transferee in the event of any such transfer of title to Senior Lender,
except with respect to the Owner's and other Indemnified Parties rights to
proceeds payable under the policies of insurance required under Section 15(b)
which shall not be affected by any such foreclosure.
Section 16. Loss, Damage or Destruction.
---------------------------
(a) Lessee hereby assumes all risk of loss, damage, theft, Taking,
destruction, confiscation, requisition or commandeering, partial or complete, of
or to the Leased Property, however caused or occasioned, such risk to be borne
by Lessee with respect to the Leased Property from and after the Closing Date.
Lessee agrees that no occurrence specified in the preceding sentence shall
impair, in whole or in part, any obligation of Lessee under this Lease,
including, without limitation, the obligation to pay Base Rental and Additional
Rental. The provisions of this Lease, including those in this Section 16,
constitute an express agreement between Owner and Lessee that applies in the
event of any Casualty to the Leased Property, Improvements or the Land. Lessee,
therefore, fully waives the provisions of any statute or regulation, including
California Civil Code Sections 1932(2) and 1933(4), for any rights concerning a
Casualty.
(b) Lessee shall give Owner and Senior Lender prompt notice of the
occurrence of any fire or other hazard or casualty or cause (a "Casualty")
resulting in damage or destruction to all or any portion of the Leased Property
or the institution of any Taking. All insurance proceeds on the Leased Property
(whether or not insurance was requested or required by Owner or Senior Lender)
payable by reason of a Casualty and all causes of action, claims, compensation,
awards and recoveries for any Taking are hereby assigned to Owner and Senior
Lender and the Owner has reassigned its interests in the same to the Senior
Lender pursuant to the Deed of Trust. Owner and Senior Lender may each
participate in any suits or proceedings relating to any such proceeds, causes of
action, claims, compensation, awards or recoveries and Owner and Senior Lender
are each authorized, in their own names or in the Lessee's name, to adjust any
loss covered by any insurance (whether or not such insurance was requested or
required by Owner or Senior Lender) or any claim or cause of action in
connection with a Taking and Lessee shall from time to time deliver to Owner or
Senior Lender any instruments required to permit such participation; provided,
however, that, if there is not a Default or Event of Default hereunder which has
occurred and is continuing, the Owner and Senior Lender shall not have the right
to participate in the adjustment of any loss which is not in
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excess of the lesser of (i) ten percent (10%) of the then outstanding principal
amount of the Senior Loan and (ii) $250,000. All proceeds of a Casualty or
Taking shall be paid to Senior Lender and shall be applied in accordance with
the provisions of Section 1.9 of the Deed of Trust while the Senior Loan is
outstanding. So long as no Event of Default has occurred and is continuing, if
Senior Lender permits the Owner to use the proceeds of a Casualty or Taking to
rebuild or restore the Leased Property, Owner hereby directs and authorizes
Lessee and Lessee hereby agrees to rebuild and restore the Leased Property and
seek reimbursement therefor from the Senior Lender from the proceeds of a
Casualty or Taking. If requested by the Lessee, the Owner shall join in any
request made to Senior Lender for the release of the proceeds of a Casualty or
Taking provided that Lessee (and Lessee's Parent) shall indemnify and hold
harmless Owner and each of the other Indemnified Parties for any loss, damages,
claims, expenses or liabilities incurred by Owner or any Indemnified Party by
reason of joining in such request. If the Senior Lender accelerates the maturity
of the Senior Loan as a result of a Casualty or Taking in accordance with the
Senior Loan Documents, such acceleration shall constitute an "Event of Loss"
-------------
(notwithstanding that it does not comply with the definition in Section 16(d))
hereunder and the Lessee shall be required to pay to the Owner the Termination
Value, together with the other amounts specified in Section 16(d) hereof. The
provisions of this Section 16(b) to the extent the same grant rights to or
create obligations in favor of the Senior Lender shall not be applicable if the
Senior Loan is not then outstanding.
(c) The remaining provisions of this Section 16 shall apply only if the
Senior Loan is not outstanding and a Taking or Casualty to the Leased Property
occurs. The amounts received for any Casualty, less such costs and expenses,
shall be referred to as the "Net Casualty Award" and the amounts received for
any Taking, less such costs and expenses, shall be referred to as the "Net
Taking Award." All such amounts shall be applied either (x) to the payment of
the Termination Value and the other amounts due under Section 16(d) hereof, if
such Casualty or Taking results in, or the Lessee elects to deem such Casualty
or Taking as, an Event of Loss, or (y) to pay in accordance with Section 16(e)
hereof for the actual cost of repair, restoration, rebuilding or replacement of
the Improvements by Lessee (collectively, "Cost To Repair") if such Casualty or
Taking does not result in, or the Lessee does not elect to deem such Casualty or
Taking as, an Event of Loss.
(d) If the Taking or Casualty constitutes an Event of Loss, Lessee shall
pay to Owner on the Rent Payment Date next following the date of such Event of
Loss the sum of (i) all unpaid Base Rental due on or before such Rent Payment
Date or such last day of the Rental Period, plus (ii) the Termination Value as
of such Rent Payment Date, plus (iii) Additional Rental due as of such Rent
Payment Date. Any payments received at any time by Owner or by Lessee
constituting either Net Casualty Award or Net Taking Award from any insurer or
other party (except Lessee) as a result of the occurrence of such Event of Loss
will be applied in reduction of Lessee's obligation to pay the foregoing
amounts, if not already paid by Lessee, or, if already fully paid by Lessee,
will be applied to reimburse Lessee for its payment of such amount or amounts.
Upon payment in full of such Termination Value, Base Rental and Additional
Rental, (A) the obligation of Lessee to pay Base Rental hereunder shall
terminate and the Term of this Lease shall thereupon terminate, and (B) the
Owner shall transfer to Lessee all of the Owner's interest in the Leased
Property in accordance with the provisions of Section 32 hereof. As used in
this Lease, the term "Termination Value" of the Leased Property as of any Rent
-----------------
Payment Date means the amount set forth in the table of Termination Values for
the applicable Rent Payment Date set forth on Exhibit C hereto. An "Event of
--------
Loss" shall be deemed to have occurred if either (a) with respect to a Casualty,
- ----
sixty percent (60%) or more
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of the Improvements shall have been destroyed; or (b) with respect to a Taking,
the Taking renders the Leased Property or any Material portion thereof
permanently unfit for its intended use under the Lease; or (c) or within the
last six (6) months of the any Basic Lease Term or Extension Term unless Lessee
has exercised its right to enter into the following Extension Term and with
respect to a Casualty only, twenty-five percent (25%) or more of the
Improvements shall have been damaged or destroyed. Either the Owner or the
Lessee may declare that the Taking or Casualty constitutes an Event of Loss,
provided, however, that the Lessee may deem such Taking or Casualty as an "Event
of Loss," regardless of the extent of damage or destruction the Improvements
with respect to a Casualty, and regardless of the effect of the Taking on the
utility of the Leased Property, with respect to a Taking, and the Owner is paid
the Termination Value in full and the other amounts required to be paid under
this Section 16(d). Upon making such determination, the party making such
determination shall notify the other party in writing thereof. If Owner
determines that such Taking or Casualty constitutes an Event of Loss, it shall
notify the Lessee thereof and the Lessee shall have ten (10) Business Days from
the date the Owner delivers notice of its determination to initiate a challenge
in writing to such determination pursuant to the provisions of Section 16(g)
below. If no challenge in writing is made by the Lessee of an Owner's
determination of an Event of Loss, such determination shall be binding upon
Lessee. If Owner and Lessee determine that such Taking or Casualty does not
constitute an Event of Loss (or if Owner's determination of an Event of Loss is
not upheld after arbitration pursuant to Section 16(g) hereof), Lessee shall be
required to repair, replace and restore the Leased Property as provided in
paragraph (e) below.
(e) If a Taking or Casualty to the Leased Property occurs which does not
result in (or is not otherwise deemed to constitute) an Event of Loss and the
Lessee elects to repair, replace and restore the Leased Property, it shall, at
its sole cost and regardless of whether any amounts constituting a Net Casualty
Award or Net Taking Award are made available to Lessee for such purpose, proceed
with diligence and promptness to carry out any demolition and to restore,
repair, replace and/or rebuild the Leased Property, as nearly as practicable, to
a condition and fair market value not less than the condition required to be
maintained and fair market value thereof immediately prior to such Taking or
Casualty. No repair or restoration work undertaken by Lessee pursuant to this
Section shall violate the terms of any Permitted Lien or other restriction,
easement, condition or covenant or other matter affecting title to the Leased
Property, and shall be undertaken and completed in a good and workmanlike manner
and in compliance in all material respects with all Legal Requirements then in
effect with respect to the Leased Property. If the Lessee elects to repair,
replace and restore the Leased Property, it shall submit for approval by Owner
prior to the commencement of any work, all plans, specifications, cost estimates
and contracts for the restoration or repair of the loss or damage, provided,
however, the Owner shall not unreasonably withhold such approval provided that
the utility, fair market value and useful life of the Leased Property after the
restoration or repair is not less than the utility, fair market value and useful
life of the Leased Property prior to the Taking or Casualty.
Upon the performance of the restoration or repair work in accordance with
this Section 16(e), any Net Casualty Award or Net Taking Award received by
Owner will be released to Lessee in partial monthly disbursements equal to
ninety percent (90%) of the value of the work completed (or if the contract is
on a cost-plus basis, then monthly advances of ninety percent (90%) of the costs
of the work completed if less than the value of the work). The release by Owner
of Net Casualty Awards or Net Taking Awards shall be subject to the satisfaction
of the following conditions:
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(i) no Default or Event of Default shall have occurred and be
continuing hereunder;
(ii) Owner is in receipt of any architect's certificates,
contractor's sworn statements and other evidence of costs, payments and
completion as the Owner may require and satisfactory evidence of payment and
release or partial release of all Liens of contractors, sub-contractors, and
materialmen and of any other Person providing work, service or materials in
connection with the repair, replacement and restoration of the Leased Premises
completed to the date of disbursement;
(iii) Receipt by Owner of all required approvals, if any, of any
municipal or other governmental authorities having jurisdiction over the Leased
Premises and all approvals required under any Permitted Liens.
The remaining portion of the Net Casualty Award or Net Taking Award shall
be released by Owner upon completion of the restoration and repairs provided
that the conditions set forth above have been met in full. The Lessee agrees at
the Owner's request to provide the Owner with copies of any available as-built
surveys and as-built plans and specifications of the Leased Property after
completion of the restoration and repair of the Leased Property.
(f) The Lessee's obligation to pay Base Rental and Additional Rental shall
not abate by reason of a Taking or a Casualty, and this Lease shall continue in
full force and effect and Lessee shall continue to perform and fulfill all
obligations, covenants and agreements hereunder notwithstanding such Taking or
Casualty.
(g) In the event the Lessee objects to the Owner's determination that a
Taking or a Casualty constitutes an Event of Loss and notifies the Owner in
writing of its objection, the parties agree in good faith to attempt to resolve
the dispute through negotiation and agree to refer the matter to one or more of
their respective officers or employees who have the authority to resolve the
dispute. If no resolution is reached within ten (10) Business Days (or such
longer period as the parties may mutually determine), then Lessee and Owner
shall submit to arbitration before a single arbiter in San Francisco,
California, under the Commercial Arbitration Rules of the American Arbitration
Association then in effect. If the parties are unable to agree on a single
arbiter within a further ten (10) Business Day period, each party shall select
an arbiter and the two arbiters so selected shall select a third. The resulting
decision of the arbiter or arbiters shall be deemed final from which no appeal
or review may be taken. All expenses and costs of such arbitration shall be
borne by the party not prevailing in the proceeding. The parties agree that each
shall have the rights to discovery pursuant to California Code of Civil
Procedure Sections 1283, 1283.05 and 1283.1 or any successor statutes.
Section 17. Additions and Improvements; Removal. Subject to the
-----------------------------------
applicable Legal Requirements and the provisions of the Deed of Trust, if in
effect, Lessee shall have the right during the Term of this Lease to make any
additions or improvements to the Leased Property to attach fixtures, structures
or signs, and to affix any personal property to the Leased Property, so long as
(i) the utility, fair market value and useful life of the Leased Property is not
thereby reduced in any Material respect, (ii) prior to the construction of any
structural improvement, Lessee shall deliver a certificate of an AIA registered
architect and a certificate of a registered engineer to the effect that
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the planned structural improvement will comply in all Material respects with all
applicable Legal Requirements, will not Materially and adversely affect or
interfere with the utility, operation or structural integrity of the then
existing Improvements and shall conform to the character and quality of the
existing Improvements, (iii) Lessee shall finance such construction with its own
funds or through a borrowing unsecured by the Leased Property. Each such
improvement (and all fixtures and equipment included as a part thereof) shall be
deemed a part of the Leased Property and become part of Owner's property. Lessee
may remove, during or at the expiration or other termination of the Term of this
Lease, all equipment and personal property placed or installed in or upon the
Leased Property after the Basic Term Commencement Date by Lessee or under its
authority, other than any equipment or personal property included as a part of
the Leased Property title to which, prior to the exercise of Lessee's purchase
option or a third party sale, is held by the Owner, provided that Lessee shall
repair any damage to the Leased Property resulting from such removal.
Section 18. Right Of Entry. Subject to the rights of tenants or residents
--------------
under any lease, representatives of the Owner shall have the right to enter upon
the Leased Property (and to review and copy Lessee's records regarding the
Leased Property which Lessee agrees to provide to Owner for inspection) during
reasonable business hours (i) to inspect the same (including, without
limitation, the use of photographic and video equipment) or (ii) for any purpose
connected with the rights or obligations of the parties under this Lease.
Unless a Default or Event of Default has occurred and is continuing, Lessee
shall be given no less than 48 hours prior notice of entry. The Lessee shall
afford the Senior Lender access to the Leased Property in the manner required
under the Deed of Trust.
Section 19. Assignments and Subleasing; Subordination and Attornment.
--------------------------------------------------------
(a) Assignment By Lessee. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH BELOW,
--------------------
LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF SENIOR LENDER AND OWNER
IN EACH INSTANCE, SUBLEASE OR OTHERWISE RELINQUISH POSSESSION OF THE LEASED
PROPERTY OR ANY PART THEREOF, OR ASSIGN, TRANSFER, MORTGAGE OR ENCUMBER ITS
RIGHTS, INTERESTS OR OBLIGATIONS HEREUNDER AND ANY ATTEMPTED SUBLEASE,
RELINQUISHMENT, ASSIGNMENT, TRANSFER OR ENCUMBERING BY LESSEE SHALL BE NULL AND
VOID. Furthermore, Lessee shall not be permitted to merge, consolidate or sell
a substantial portion of its assets (other than inventory in the ordinary course
of its business) without Owner's prior written consent in each instance unless
each of the following conditions are met in full or waived in writing by Owner
(i) the surviving, resulting or acquiring entity expressly assumes in writing
all of Lessee's past, current and future obligations and liabilities under this
Lease, the form and content of such documentation, including an opinion of
counsel, to be satisfactory to Owner in its sole and absolute discretion, (ii)
at the time of such merger, consolidation or sale, no Event of Default shall
have occurred and be continuing, (iii) all of the representations of Lessee set
forth in Section 12 hereof shall be true and correct with respect to the
surviving, resulting or acquiring entity as if made directly by such entity as
of the date of the merger, consolidation or sale; (iv) the surviving, resulting
or acquiring entity is a wholly owned subsidiary of Lessee's Parent or such
other Person which is acceptable to Owner in its sole discretion, and (v) such
merger, consolidation or sale is permitted under the Senior Loan Documents or is
otherwise approved by the Senior Lender in writing. Notwithstanding the
foregoing, Lessee may enter into subleases with occupants of the Leased Property
provided that (i) if the Senior
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Loan is outstanding, all of the provisions of Section 1.12 of the Deed of Trust
are fully complied with by Lessee and (ii) such subleases are in a form approved
by the Owner and, if the Senior Loan is outstanding, the Senior Lender and (iii)
all such subleases are entered into in the ordinary course of the Lessee's
business.
(b) Assignment By Owner. This Lease and all Base Rental and Additional
-------------------
Rental (except for the Excepted Rights) due and to become due hereunder have
been assigned by Owner to Senior Lender pursuant to the terms of the Deed of
Trust and the Assignment of Leases and Rents and constitutes part of the "Rents
-----
and Profits" as such term is defined in the Deed of Trust, although until an
- -----------
Event of Default occurs under the Senior Loan Documents, Senior Lender has
agreed that Base Rental which is Equity Rental shall be payable directly to the
Administrator. The Senior Lender may re-assign and/or grant a security interest
in any of such rights, obligations, title or interest assigned to the Senior
Lender. Lessee agrees to execute any documents that may be reasonably requested
by Owner or the Senior Lender in connection with the assignment of this Lease to
the Senior Lender provided that such documents do not increase the liability of
Lessee in any Material respect. Lessee acknowledges receipt of executed copies
of the Senior Loan Documents. Any Person to whom any sale, assignment, transfer
or grant of security interest (which has been consented to by Senior Lender
while the Senior Loan is outstanding) is made by Owner is herein called an
"Assignee".
(c) Rights of Senior Lender. Without limiting the foregoing or any of the
-----------------------
provisions of Section 7 hereof, Lessee further acknowledges and agrees that (i)
the rights of the Senior Lender in and to the sums payable by Lessee under any
provision of this Lease shall not be subject to any abatement whatsoever and
shall not be subject to any defense, set-off, counterclaim or recoupment
whatsoever, whether by reason of failure of or defect in Owner's title, or any
interruption from whatsoever cause in the use, operation or occupancy of the
Leased Property, or any damage to, loss, destruction, reduction or impairment of
the Leased Property for any reason whatsoever, or by reason of any other
indebtedness or liability, howsoever and whenever arising, of Owner to Lessee or
to any other Person or for any cause whatsoever, it being the intent hereof that
Lessee shall be unconditionally and absolutely obligated to pay directly to the
Senior Lender (on behalf of Owner) until the Senior Loan is paid in full all of
the Base Rental (other than Equity Rental) and all Additional Rental (except the
Excepted Rights which remain payable directly to Owner and the other Indemnified
Parties) payable by Lessee hereunder; (ii) Lessee's covenants, representations
and warranties in this Lease (including, without limitation, in Section 12
hereof) shall be deemed to be made to and for the benefit of, the Senior Lender
as well as Owner; and (iii) the Senior Lender shall be entitled to the benefit
of all covenants and obligations to be performed by Lessee under this Lease,
except Lessee's covenants and obligations relating to Excepted Rights.
Notwithstanding the assignment to the Senior Lender, Lessee and Owner
acknowledge that all obligations of Owner to Lessee under this Lease shall be
and remain enforceable by Lessee against, and only against, Owner.
(d) Subordination and Attornment. This Lease and Lessee's interest
----------------------------
hereunder shall at all times be subject and subordinate to the lien and security
title of the Senior Loan Documents and any advances made thereunder and all
renewals, modifications, consolidations, replacements, substitutions and
extensions thereof.
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Lessee and Owner acknowledge and agree that Lessee's payments of the Senior
Loan Debt Service component of the Base Rental and Lessee's payment to Senior
Lender of any other amounts due under the Senior Loan Documents shall not be
deemed to: (i) cause Senior Lender to succeed to or to assume any obligations or
responsibilities as landlord or Owner under the Lease, all of which shall
continue to be performed and discharged solely by Owner unless and until Senior
Lender has agreed to any attornment by Lessee under this Lease (which Senior
Lender has no obligation to do); (ii) relieve Owner of any obligations under the
Lease; or (iii) cure any default by Owner under any of the Senior Loan
Documents.
Lessee shall be entitled to full credit under the Lease for any Base Rental
or Additional Rental paid to Senior Lender pursuant to the terms hereof to the
same extent as if such Base Rental were paid directly to Owner.
No act or failure to act on the part of the Owner which would entitle
Lessee under the terms of this Lease, or by law, to be relieved of any of
Lessee's obligations hereunder (including, without limitation, its obligation to
pay Base Rental or Additional Rental) or to terminate this Lease shall result in
a release or termination of such obligations of Lessee or termination of this
Lease unless: (i) Lessee shall have first given written notice of Owner's act or
failure to act to Senior Lender, specifying the act or failure to act on the
part of Owner which would give rise to Lessee's rights; and (ii) Senior Lender,
after receipt of such notice, shall have failed or refused to correct or cure
the conditions complained of within a reasonable time thereafter (in no event
more than ninety (90) days), provided that such cure period shall include a
reasonable time for Senior Lender to obtain possession of the Leased Property if
possession is reasonably necessary for Senior Lender to correct or cure the
condition or to foreclose the Deed of Trust, if Senior Lender notifies the
Lessee of its intention to take possession of the Leased Property or to complete
the foreclosure of such Deed or Trust and unconditionally commits to correct or
cure such conditions. If Senior Lender is prohibited by any process or
injunction issued by any court or by reason of any action by any court having
jurisdiction or any bankruptcy, debt or rehabilitation or insolvency proceedings
involving Owner or Lessee from commencing or prosecuting foreclosure or other
appropriate proceedings in the nature thereof, the Lease, at the option of the
Senior Lender, shall continue to be in full force and effect and the times for
commencing or prosecuting such foreclosure or other proceedings shall be
extended for the period of such prohibition. Lessee shall deliver to Senior
Lender a duplicate copy of any and all notices regarding any default which
Lessee may from time to time give or serve upon Owner pursuant to the provisions
of this Lease. Copies of such notices given by Lessee to Owner shall be
delivered to Senior Lender simultaneously with delivery to Owner. No such
notice by Lessee to Owner hereunder shall be deemed to have been given unless a
copy thereof has been given to Senior Lender pursuant to the terms hereof.
If Senior Lender or any other party ("Successor Landlord") becomes owner of
------------------
the Leased Property as the result of a foreclosure or any other exercise by
Senior Lender of its right and remedies under the Senior Loan Documents or by a
deed in lieu thereof, then, at Successor Landlord's election, Lessee shall
recognize and attorn to Successor Landlord as Lessee's direct landlord and
Successor Landlord shall not be (i) liable for any act or omission of Owner,
(ii) subject to any offset right or termination right that Lessee may have
relating to any event or occurrence before the date of attornment, including any
claim for damages of any kind whatsoever as the result of any breach by Owner
that occurred before (but not after) the date of attornment; (iii) bound by
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any representation or warranty of Owner, by any previous modification of this
Lease not consented to in writing by Senior Lender or by any payment of Lessee
of more than one month's rent or any security deposit not actually received by
Successor Landlord. If KCCI and/or SELCO have foreclosed on the Supplemental
Collateral and the proceeds of such foreclosure has been applied to the
reduction or payment in full of the B Investor Loan and/or SELCO Contribution,
then the Base Rental shall be adjusted to reflect such reduction or payment in
full.
(e) Subsequent Lenders. Upon or concurrently with the payment in full of
------------------
all indebtedness outstanding under the Senior Loan and the termination of the
Senior Lender's Lien in the Leased Property in accordance with the provisions of
the Deed of Trust and with the prior written consent of Healthcare Realty, KCCI
and SELCO while any of the Equity Balance remains outstanding, the Owner shall,
at Lessee's written request, re-assign, sell or transfer and/or grant a Lien in,
this Lease, in whole or in part and/or Leased Property to any Person, and upon
notice of such assignment, sale, transfer or grant, Lessee shall comply with the
requests and demands of such Person as if such Person was the Senior Lender as
provided above; provided that such Person shall agree, with or for the benefit
of Lessee, that it shall not disturb Lessee's possession under the Lease and
shall respect and take its Lien subject to Lessee's right to purchase the Leased
Premises under the terms of this Lease, so long as no Event of Default shall
have occurred and be continuing under this Lease. Prior to the occurrence and
continuance of an Event of Default, Owner shall not take any affirmative action
to sell, transfer or grant a Lien on the Leased Property or this Lease without
Lessee's prior written consent, except that nothing in this section 19(e) shall
prevent the Owner remarketing the Leased Property in accordance with Section 30
hereof.
If Lessee desires that Owner refinance the Senior Loan at any time when the
Senior Loan may be prepaid in accordance with its terms, Owner agrees to
cooperate with Lessee in effecting such refinancing provided (i) all costs,
expenses, fees and other amounts incurred by reason of such refinancing are paid
in full by Lessee, including, without limitation, any fees or expenses payable
to the party arranging or holding the loan made to refinance the Senior Loan
(the "Successor Senior Lender"), (ii) Owner's right to directly receive Base
Rental relating to the Equity Balance and any Additional Rental shall not be
affected and any subordination of the Owner's, Healthcare Realty's, KCCI's and
SELCO's rights to receive Base Rental and Additional Rental shall be reasonably
acceptable to such Persons, (iii) the rights of the Indemnified Parties to
exercise any of the Excepted Rights directly against Lessee (or Brookdale under
the Indemnity Agreement) continue and are not made subordinate to the rights of
the Successor Senior Lender for indemnification, (iv) the rights of Owner, KCCI
and SELCO to enforce their Lien in the Supplemental Collateral shall continue
and the Successor Senior Lender shall not have any rights to a Lien on the
Supplemental Collateral, (v) the terms and provisions of the loan made or held
by the Successor Senior Lender are satisfactory to Owner, Healthcare Realty,
KCCI and SELCO and Lessee shall deliver any documents, certificates, opinions of
counsel or other material which may be reasonably requested by Owner, Healthcare
Realty, KCCI or SELCO in connection with the loan being made by the Successor
Senior Lender and the relative rights of Owner, Healthcare Realty, KCCI or SELCO
and the Successor Senior Lender, (vi) the principal amount of the loan being
made by the Successor Senior Lender does not exceed the principal amount of the
Senior Loan, unless Healthcare Realty and SELCO have consented thereto, (viii)
the Base Rental payable hereunder shall be adjusted to reflect debt service
payments payable to the Successor Senior Lender on the new Loan, and (viii) no
Default or Event of Default shall have occurred and be continuing hereunder.
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Section 20. Environmental Matters. Lessee hereby represents and warrants
---------------------
to and covenants with Owner, Senior Lender, SELCO, Healthcare Realty, KCCI, the
Administrator, and their respective Affiliates, successors, assigns,
stockholders, partners, directors, officers, trustees, employees, beneficiaries,
attorneys and accountants and any other Person claiming by through or under
Owner, Senior Lender, SELCO, Healthcare Realty, KCCI, the Administrator or any
of their successors or assigns (collectively, "Indemnified Parties") as follows:
(a) Lessee covenants and agrees that (i) Lessee shall comply with all
Environmental Legal Requirements, including, but not limited to, Hazardous
Materials Legal Requirements, applicable to the Leased Property or as required
by any governmental agency or third party, and (b) Lessee shall take, and cause
each permitted sublessee and assignee to take, all remedial action necessary to
avoid any liability of Lessee, or any Indemnified Party for, and to avoid the
imposition of, or to discharge, any Liens on the Leased Property, as a result
of, any failure to comply with Environmental Legal Requirements with respect to
the Leased Property.
(b) Without limiting the generality of the foregoing, Lessee agrees that it
shall not:
(i) release any Hazardous Materials on or under the Leased Property
or fail to take all reasonable precautions to prevent the release or threat of
release of any Hazardous Materials on or under the Leased Property;
(ii) generate any Hazardous Materials on or under the Leased
Property or fail to take all reasonable precautions to prevent the generation of
Hazardous Materials on or under, or the migration of Hazardous Materials to, the
Leased Property;
(iii) except in compliance with all Environmental Legal Requirements,
store or utilize, or permit any Hazardous Materials to be stored or utilized on
the Leased Property provided, however, that the materials listed in Schedule II
attached hereto may be used on or about the Leased Property and stored on the
Leased Property in the quantities listed in such Schedule provided that all
Environmental Legal Requirements are complied with in connection with such use
or storage;
(iv) dispose of or permit any Hazardous Materials to be disposed of
on the Leased Property except in compliance with all Environmental Legal
Requirements; and
(v) use, or allow the Leased Property to be used, in a manner which
does not comply with all Environmental Legal Requirements in all Material
respects.
(c) Lessee shall provide Owner with prompt written notice, but in no event
later than ten (10) Business Days after obtaining any actual knowledge or actual
notice thereof, of any of the following conditions: (i) the presence, or any
release or threat of release, of any Hazardous Materials on, under or from the
Leased Property, whether or not caused by any of the Indemnified Parties;
provided, however, that no notice of the use or storage of the materials noted
on Schedule II attached hereto not exceeding the quantities indicated thereon
shall be required if such use or storage is in compliance in all Material
respects with Environmental Legal Requirements; (ii) any Environmental
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Enforcement Action instituted or threatened in writing; or (iii) any condition
or occurrence on the Leased Property that constitutes a violation of any of the
Environmental Legal Requirements.
(d) Upon Lessee obtaining knowledge or notice of: (i) the violation of any
Environmental Legal Requirement related to the Leased Property, or (ii) the
presence, or any release or any threat of release, of any Hazardous Materials
on, under, or from the Leased Property, which is lawfully claimed by any
Governmental Authority or third party to violate any other Environmental Legal
Requirement, or any combination thereof, Lessee shall immediately take all
reasonable actions to cure or eliminate any such violation of any such
Environmental Legal Requirement and, where applicable, to arrange for the
assessment, monitoring, clean-up, containment, removal, remediation, or
restoration of the Leased Property as are required pursuant to any Hazardous
Materials Legal Requirements or by any Governmental Authority.
(e) Owner shall have the right (but not the obligation) to require Lessee,
at its own cost and expense, to obtain a professional environmental assessment
of the Leased Property in accordance with Owner's requirements and sufficient
in scope to determine compliance with Hazardous Materials Legal Requirements
upon the occurrence of any one or more of the following events: (i) an Event of
Default hereunder; or (ii) upon receipt of any notice of any of the conditions
specified in Section 20(c) hereof unless Lessee complies with the remedial
actions required pursuant to Section 20(d), or (iii) upon any return of the
Leased Property in accordance with Section 34(d) hereof.
(f) Owner may exercise its rights and remedies under all of this paragraph
(f) only upon and following the existence of one or more of the following events
or conditions: (i) an Event of Default has occurred and is continuing; (ii) an
Indemnified Party, or an affiliate thereof, or any nominee or designee of an
Indemnified Party or an affiliate thereof has taken possession of all or some
portion of the Leased Property based upon an Event of Default; (iii) an
Indemnified Party, or an affiliate thereof or any nominee or designee of an
Indemnified Party or an affiliate thereof, has commenced foreclosure proceedings
or has acquired title to all or some portion of the Leased Property by virtue of
foreclosure or deed in lieu of foreclosure; or (iv) a claim has been asserted
against an Indemnified Party for which indemnification is provided herein, but
Lessee has not undertaken or is not continuing to pursue, after having
undertaken, commercially reasonable efforts to remediate, defend and otherwise
indemnify any such Indemnified Party. In any of such events, the Owner shall
have the right, but not the obligation, through such representatives or
independent contractors as it may designate, to enter upon the Leased Property
and to expend funds to:
(A) cause one or more environmental assessments of the Leased
Property to be undertaken, if Owner in its sole but reasonable discretion
determines that such assessment is appropriate. Such environmental
assessments shall be reasonable in scope considering the history and use of
the Leased Property and the data available from prior reports, provided,
however, the foregoing shall not limit or restrict the reasonable
discretion of the Owner's engineers and consultants in formulating the
exact parameters of any such site assessment and such site assessment may
include, without limitation, (i) detailed visual inspections of the Leased
Property, including without limitation all storage areas, storage tanks,
drains, drywells and leaching areas; (ii) the taking of soils and surface
and sub-surface water samples; (iii) the performance of soils and ground
water analysis; and (iv) the performance
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of such other investigations or analysis as are necessary or appropriate
and consistent with sound professional environmental engineering practice
in order for Owner to obtain a complete assessment of the compliance of the
Leased Property and the use thereof with all Environmental Legal
Requirements and to make a determination as to whether or not there is any
risk of contamination (x) to the Leased Property resulting from Hazardous
Materials originating on, under, or from any surrounding property or (y) to
any surrounding property resulting from Hazardous Materials originating on,
under, or from the Leased Property;
(B) cure any breach of the representations, warranties, covenants and
conditions made by or imposed upon Lessee under this Lease including
without limitation any violation by Lessee, or by the Leased Property, of
any of the Environmental Legal Requirements;
(C) take all actions as are necessary to (i) prevent the migration of
Hazardous Materials on, under, or from the Leased Property to any other
property; or (ii) prevent the migration of any Hazardous Materials on,
under, or from any other property to the Leased Property;
(D) comply with, settle, or otherwise satisfy any Environmental
Enforcement Action as the same relates to the Leased Property including,
but not limited to, the payment of any funds or penalties imposed by any
governmental authority and the payment of all amounts required to remove
any lien or threat of lien on or affecting the Leased Property; and
(E) comply with, settle, or otherwise satisfy any Environmental Legal
Requirement and correct or abate in accordance with all applicable
Environmental Legal Requirements any environmental condition on, or which
threatens, the Property and which could cause damage or injury to the
Property or to any person.
(g) Any amounts reasonably paid or advanced by Owner and all reasonable
costs and expenditures incurred in connection with any action taken pursuant to
the terms of this Section 20, including but not limited to reasonable
environmental consultants' and experts' fees and expenses, attorneys' fees and
expenses, court costs and all costs of assessment, monitoring, clean-up,
containment, remediation, removal and restoration, with interest thereon at the
Default Rate hereof shall be a demand obligation of Lessee to the Owner if not
paid within ten (10) days after notice, and, to the extent not prohibited by
law, and shall be deemed to be Additional Rental hereunder.
(h) The exercise by Owner of any one or more of the rights and remedies set
forth in this Section 20 shall not operate or be deemed to place upon Owner any
responsibility for the operation, control, care, service, management,
maintenance or repair of the Leased Property.
(i) Without limiting the generality of the other provisions of this Section
20, any partial exercise by Owner of any one or more of the rights and remedies
set forth in this Section 20 including, without limitation, any partial
undertaking on the part of Owner to cure any failure by any of Lessee, or of the
Leased Property, or any other occupant, prior occupant or prior owner thereof,
to comply with any of the Hazardous Materials Legal Requirements shall not
obligate the Owner to complete such actions taken or require Owner to expend
further sums to cure such non-compliance.
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Section 21. Environmental Indemnity. Lessee hereby agrees that it shall
-----------------------
at its sole cost and expense indemnify, defend, exonerate, protect and save
harmless each Indemnified Party on an after-tax basis against and from any and
all damages, losses, liabilities, obligations, penalties, claims, litigation,
demands, defenses, judgments, suits, proceedings, costs, disbursements or
expenses of any kind or nature whatsoever, including, without limitation,
reasonable attorneys' and experts' fees and disbursements, which may at any time
be imposed upon, incurred by, or asserted or awarded against Owner or an
Indemnified Party and arising from or out of any of the following, or any claims
alleging any of the following:
(a) Any Hazardous Materials on, in, under, or which emanated from, all or
any portion of the Leased Property, or which may hereafter be on, in, under or
emanate from, all or any portion of the Leased Property whenever discovered;
(b) The violation of any Hazardous Materials Legal Requirements by Lessee,
or with respect to the Leased Property, existing on or before the date hereof or
which may so exist in the future, whenever discovered;
(c) The violation of any Environmental Legal Requirement by Lessee, or with
respect to the Leased Property, existing on or before the date hereof or which
may so exist in the future, whenever discovered;
(d) Any Material breach of warranty or representation made by Lessee under
or pursuant to Section 20 hereof;
(e) Any Environmental Enforcement Action with respect to the Leased
Property, whenever asserted; and
(f) The enforcement of this Section 21 or the assertion by Lessee of any
defense to the obligations of Lessee hereunder, which is not sustained by a
final order of a court of competent jurisdiction which is not subject to further
appeal, whether any of such matters arise before, during or after the Term of
this Lease or the taking of possession of all or any portion of the Leased
Property by the Owner, and specifically including therein, without limitation,
the following which are incurred following an Event of Default: (i) costs
incurred for any of the matters set forth in Section 20 of this Agreement; and
(ii) costs and expenses incurred in ascertaining the existence or extent of any
asserted violation of any Environmental Legal Requirements relating to the
Leased Property and any remedial action taken on account thereof including,
without limitation, the reasonable costs, fees and expenses of engineers,
geologists, chemists, other scientists, attorneys, surveyors, and other
professionals, or testing and analyses performed in connection therewith.
(g) The obligations of Lessee under this Section 21 are not subject to any
limitation as to amount. Nothing herein shall limit the right of an Indemnified
Party to obtain injunctive relief or to pursue equitable remedies under this
Section 21. The provisions of this Section 21, and the obligations of Lessee
under this Section 21, shall apply from the Closing Date, and shall survive and
continue in full force and effect, notwithstanding the expiration or earlier
termination of the Term of this Lease in whole or in part, including the
expiration or termination of the Term, and are expressly
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made for the benefit of, and shall be enforceable by, each Indemnified Party,
provided, however, that notwithstanding the foregoing, the Lessee shall not have
any indemnification obligations to (i) the Indemnified Parties for a violation
of any Hazardous Materials Legal Requirements or Environmental Legal
Requirements or for any Environmental Enforcement Actions attributable solely to
any facts or circumstances arising after possession of the Leased Property has
been returned to Owner, the Termination Date has occurred and the Owner has
relet or sold the Leased Property or (ii) to any Indemnified Party if the
violation of any Hazardous Materials Legal Requirements or Environmental Legal
Requirements arose solely as a result of the gross negligence or willful
misconduct of such Indemnified Party.
(h) Without limiting the generality of the foregoing, Lessee and Lessee's
Parent have executed and delivered to Senior Lender a Hazardous Substances
Indemnity Agreement and in the event of any conflict of the provisions of
Section 20 or Section 21 of this Lease with the provisions of the Hazardous
Substances Indemnity Agreement as such conflicts relate to the obligation of
Lessee or Lessee's Parent to indemnify the Senior Lender, the provisions of the
Hazardous Substances Indemnity Agreement shall be controlling. Lessee agrees to
comply with the provisions of the Hazardous Substances Indemnity Agreement.
Section 22. Indemnification and Hold Harmless Agreement. To the fullest
-------------------------------------------
extent not prohibited by applicable law, Lessee hereby agrees to indemnify and
hold harmless each Indemnified Party, on an after-tax basis from and against
any and all losses, damages, injuries, costs or expenses (including reasonable
attorneys' fees and expenses) and from and against any and all suits, demands,
claims, actions or other proceedings whatsoever, brought by any entity or person
whatsoever (except suits brought by Lessee against an Indemnified Party in which
Lessee is the prevailing party) and arising or allegedly arising from (i) this
Lease or the Transaction Documents, including the Senior Loan Documents; (ii)
any transaction contemplated hereby or thereby; (iii) the acquisition,
financing, construction, installation, ownership, lease and operation of the
Leased Property (including patent or latent defects in the Land or Improvements,
whether or not discoverable by Lessee or any Indemnified Party), including,
without limitation, any suit, demand, claim or action arising under the Loan
Documents by reason of Lessee being in default or failing to otherwise perform
thereunder, hereunder or under any other Transaction Document; (iv) the defense
of any suit, demand, claim, action or other proceeding brought against such
Indemnified Party in connection with the foregoing; (v) the enforcement of any
provision of this Lease; (vi) damage, injury or death to any Person or damage to
the property of any Person, due to any defect in the Land or Improvements, or
any act or omission of any person including the defense of any suit, demand,
claim, action or other proceeding brought against such Indemnified Party in
connection with such damage or injury; (vii) any claims based upon absolute or
strict liability in tort or claims based upon patent, trademark, tradename or
copyright infringement; and (viii) any action taken in good faith by such
Indemnified Party in connection with this Lease or the Leased Property; except
that, as to any Indemnified Party, the foregoing indemnities shall not apply to
the following:
(i) losses, damages, injuries, costs or expenses solely and directly
caused by the gross negligence or willful misconduct of such
Indemnified Party;
(ii) losses, damages, injuries, costs or expenses solely and directly
caused by the mishandling or misapplication by any Indemnified Party
of payments made by the
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Lessee hereunder if such payments are made to such Indemnified
Party in accordance with the Transaction Documents;
(iii) the inaccuracy in any Material respect of any representation or
warranty made by such Indemnified Party in this Lease;
(iv) the creation or existence of an Owner Lien attributable to such
Indemnified Party;
(v) if such Indemnified Party is the Owner, or the Senior Lender, the
voluntary disposition of the Leased Property or the Lease, other
than in connection with (A) a voluntary disposition permitted after
the occurrence and during the continuance of an Event of Default,
(B) an Owner Conveyance, or (C) a subsequent transfer by the Lender
or any nominee, designee or affiliate thereof if such entity
purchases the Leased Property at a foreclosure sale or accepts a
deed-in-lieu of foreclosure of the Leased Property;
(vi) any other matters expressly excluded from any other indemnity
provisions contained in the Transaction Documents pursuant to which
the Lessee has agreed to indemnify any Indemnified Party; and
(vii) acts or events that occur after the Indemnification Period.
Lessee shall give each Indemnified Party prompt notice of any occurrence, event
or condition known to Lessee as a consequence of which any Indemnified Party may
be entitled to indemnification hereunder. Lessee shall forthwith upon demand of
any such Indemnified Party reimburse such Indemnified Party for amounts expended
by it in connection with any of the foregoing or pay such amounts directly.
Lessee shall be subrogated to an Indemnified Party's rights in any matter with
respect to which Lessee has actually reimbursed such Indemnified Party for
amounts expended by it or has actually paid such amounts directly pursuant to
this Section 22. In case any action, suit or proceeding is brought against any
Indemnified Party in connection with any claim indemnified against hereunder,
such Indemnified Party will, promptly after receipt of notice of the
commencement of such action, suit or proceeding, notify Lessee thereof,
enclosing a copy of all papers served upon such Indemnified Party, but failure
to give such notice or to enclose such papers shall not relieve Lessee from any
liability hereunder. Lessee may, and upon such Indemnified Party's request will,
at Lessee's expense, resist and defend such action, suit or proceeding, or cause
the same to be resisted or defended by counsel selected by Lessee and reasonably
satisfactory to such Indemnified Party and in the event of any failure by Lessee
to do so, Lessee shall pay all costs and expenses (including, without
limitation, attorney's fees and expenses) incurred by such Indemnified Party in
connection with such action, suit or proceeding. The provisions of this Section
22, and the obligations of Lessee under this Section 22, shall apply from the
Closing Date (notwithstanding the failure of Lessee to satisfy any condition set
forth in Section 4 hereof), and shall survive and continue in full force and
effect, notwithstanding the expiration or earlier termination of this Lease in
whole or in part, including the expiration or termination of the Term, and are
expressly made for the benefit of, and shall be enforceable by, each Indemnified
Party.
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Without limiting the generality of the foregoing, Lessee and Lessee's
Parent have executed and delivered to Senior Lender an "Indemnity and Guaranty
Agreement" and in the event of any conflict of the provisions of this Section 22
of this Lease with the provisions of the Indemnity and Guaranty Agreement as
such conflicts relate to the obligation of Lessee or Lessee's Parent to
indemnify the Senior Lender, the provisions of the Indemnity and Guaranty
Agreement shall be controlling. Lessee agrees to comply with the provisions of
the Indemnity and Guaranty Agreement.
Section 23. Events of Default by Lessee. Any of the following events
---------------------------
shall constitute Events of Default under this Lease:
(a) Lessee shall fail to make any payment of Base Rental within ten (10)
days after the same is due and payable or fails to make any payment of
Additional Rent when the same becomes due and payable and such failure continues
for thirty (30) days after written notice thereof is given to Lessee; or
(b) Lessee shall fail to pay the Termination Value, Purchase Price or End
of Term Adjustment, as applicable, when the same becomes due and payable; or
(c) Lessee shall fail to observe or perform any of its covenants or
agreements set forth in Sections 15, 16, 29, 30, 32 or 34 of this Lease; or
(d) Lessee shall fail to perform or observe any other covenant, condition,
or agreement to be performed or observed by it under this Lease and such failure
shall continue unremedied, for thirty (30) days after written notice to Lessee
specifying such failure and demanding the same to be remedied, provided,
however, that no Event of Default shall be deemed to have occurred with respect
to breach of any covenant, condition or agreement that cannot be remedied, with
the exercise of reasonable diligence on Lessee's part, within such thirty (30)
day period, if Lessee commences cure of such failure within such thirty (30) day
period and diligently pursues such cure to completion, provided further,
however, that the period given to the Lessee to remedy such failure should not
exceed a total of one hundred twenty (120) days from the initial notice of
default is given to Lessee, provided further still, that if such failure relates
to a failure to comply with Environmental Legal Requirements, such one hundred
twenty (120) day period may be extended to such longer period as may be
reasonably necessary to remedy such failure; or
(e) Owner shall be in default beyond any grace or cure period under any of
the Senior Loan Documents by reason of (i) the failure of the Lessee to perform
any of the Owner's obligations under the Senior Loan Documents or (ii) any
failure of the Lessee to perform its obligations hereunder; or
(f) Lessee shall be in default beyond any applicable grace or cure periods
(i) under any Transaction Documents to which it is a party or any lease, loan
agreement or other agreement, instrument or document heretofore, now or
hereafter entered into between Lessee and Owner, or between Lessee and any
parent, subsidiary or affiliate of Owner, or between Lessee and Senior Lender,
or between Lessee's Parent and Owner or between Lessee's Parent and Senior
Lender or (ii) under any promissory note or guarantee heretofore, now or
hereafter executed by Lessee or Lessee's Parent and delivered to any party
referred to in clause (i) above evidencing or guaranteeing a loan
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made by any such party to Lessee, Lessee's Parent or Owner any obligation of
Lessee or Lessee's Parent, to any Person (other than Owner, or any parent,
subsidiary or affiliate of Owner) in excess of $1 million relating to the
payment of borrowed money or the payment of rent or hire under any lease
agreement, shall be declared to be due and payable or otherwise accelerated
prior to the maturity thereof by reason of a default in payment or performance
by Lessee or Lessee's Parent (excluding any such default which is being
contested in good faith by Lessee or Lessee's Parent by appropriate proceedings
and the liability for which has not been reduced to judgment); or an attachment
or other Lien shall be filed or levied against a substantial part of the
property of Lessee or Lessee's Parent (taken in aggregate), and such judgment
shall continue unstayed and in effect, or such attachment or Lien shall continue
undischarged or unbonded, for a period of thirty (30) days; (unless Lessee has
the right to contest such Lien under this Lease and is contesting the same in
accordance with the terms hereof) or
(g) Lessee or Lessee's Parent shall become insolvent or make an assignment
for the benefit of creditors or consent to the appointment of a trustee or
receiver; or a trustee or a receiver shall be appointed for Lessee or Lessee's
Parent or for a substantial part of its property without its consent and shall
not be dismissed for a period of sixty (60) days; or any petition for the
relief, reorganization or arrangement of Lessee or Lessee's Parent, or any other
petition in bankruptcy or for the liquidation, insolvency or dissolution of
Lessee or Lessee's Parent, shall be filed by or against Lessee or Lessee's
Parent and, if filed against Lessee or Lessee's Parent, shall be consented to or
be pending and not be dismissed for a period of sixty (60) days, or an order for
relief under any bankruptcy or insolvency law shall be entered by any court or
governmental authority of competent jurisdiction with respect to Lessee or
Lessee's Parent; or any execution or writ or process shall be issued under any
action or proceeding against Lessee or Lessee's Parent whereby any of the Leased
Property may be taken or restrained (other than a Taking); or Lessee's or
Lessee's Parent's corporate existence shall cease; or Lessee or Lessee's Parent
shall (whether in one transaction or a series of transactions) without Owner's
prior written consent, sell, transfer or dispose of, or pledge or otherwise
encumber, all or substantially all of its assets or property, or consolidate or
merge with any other entity, or become the subject of, or engage in, a leveraged
buy-out or any other form of corporate reorganization; or
(h) any representation, warranty, statement or certification made by Lessee
under this Lease or in any document or certificate furnished to Owner or any
Assignee in connection herewith or pursuant hereto, shall prove to be untrue or
incorrect in any Material respect when made, or shall be breached in any
Material respect.
Section 24. Remedies Upon Default. Upon the occurrence of any Event of
---------------------
Default and at any time thereafter so long as the same shall be continuing,
Owner may exercise one or more of the following remedies:
(a) The Owner may take action at law or in equity to collect any payments
then due or thereafter to become due under this Lease, or to enforce performance
and observance of any term, covenant or condition of this Lease applicable to
Lessee, including, without limitation, the remedies permitted by Sections 1951.2
or 1951.4 of the California Civil Code, whichever is applicable, or any
amendments thereof. Upon application by Owner, a receiver may be appointed to
take possession of the Leased Property and exercise all rights granted to Owner
as set forth in this Section 24.
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(b) The Owner may, in addition to or in lieu of taking such action at law
or in equity as it may otherwise be entitled to, terminate the leasehold estate
created hereby by giving Lessee not less than ten (10) days' prior written
notice of the date Owner elects to make such termination effective (such notice
period is referred to as the "Standstill Period") and, subject to the Lessee's
rights under Section 24(e) below, the Owner may upon or after the completion of
the Standstill Period repossess the Leased Property without further notice,
either by summary proceeding or other suitable action either at law or in equity
or otherwise, and without being deemed guilty of any manner of trespass and
without prejudice to any remedies which might otherwise be used to demand, sue
for or collect arrears of Base Rental and Additional Rental and any other
accrued obligations of Lessee under this Lease, and Lessee hereby waives all
statutory rights (including without limitation rights of redemption, if any, to
the extent such rights may be lawfully waived), provided, however, that if the
Basic Lease Term or Extension Lease Term then in effect would otherwise expire
during said Standstill Period, such Basic Lease Term or Extension Lease Term
shall be extended to the end of the Standstill Period and Lessee shall be liable
for the payment of all Basic Rent and Additional Rent during such extended
rental period. In calculating the amount of any deficiency for which Lessee
shall be liable hereunder, there shall be included, in addition to Base Rental
and Additional Rental, the value of all other considerations agreed to be paid
or performed by Lessee under this Lease. In calculating the amounts to be paid
by Lessee pursuant to the foregoing sentence, there shall also be included all
of the Owner's reasonable expenses in connection with any sale or reletting of
the Leased Property, including, without limitation, all repossession costs,
brokerage commissions, reasonable fees for legal services and expenses of
preparing the Leased Property for such sale or reletting, it being agreed by
Lessee that the Owner may, but shall not be obligated to, (A) relet the Leased
Property or any other portion thereof for a term or terms which may at the
Owner's option be equal to or less than or exceed the period which would
otherwise have constituted the balance of the Basic Lease Term or an Extension
Lease Term then in effect and may grant such concessions and free rent as the
Owner in its reasonable judgment considers advisable or necessary to relet the
same, (B) make such alterations, repairs and decorations in or to the Leased
Property as the Owner in its reasonable judgment considers advisable or
necessary to sell or relet the same, or (C) keep the Leased Property vacant. No
action of the Owner in accordance with the foregoing or failure to sell or relet
or to collect rent upon reletting shall operate or be construed to release or
reduce Lessee's liability hereunder except that a sale of the Leased Property
not subject to this Lease shall terminate any further accruals of rent hereunder
and Owner's only remedy in respect of such rentals shall be pursuant to Section
24(c) below. Upon the occurrence and during the continuation of an Event of
Default, the Owner shall also be entitled to foreclose upon any fixtures,
furniture or equipment or other personalty which is part of the Leased Property
pursuant to the Uniform Commercial Code of California.
(c) Whether or not Owner shall have exercised, or shall thereafter at any
time exercise, any of its rights under Section 24 (a) or (b) above with respect
to the Leased Property (but subject to Lessee's rights set forth in Section
24(e) hereof), Owner, by written notice to Lessee specifying a payment date, may
demand that Lessee pay to Owner, and Lessee shall pay to Owner, on the payment
date specified in such notice ("Liquidated Damage Payment Date") which shall not
be earlier than the end of the Standstill Period and shall not be later than the
end of the then applicable Basic Lease Term or Extension Lease Term (if the
Standstill Period expires after the applicable Basic Lease Term or Extension
Lease Term, the Liquidated Damage Payment Date shall be the first
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Business Day after the last day of the Standstill Period), as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the Base Rental due for
the Leased Property for any Rental Period commencing after the Liquidated Damage
Payment Date and in lieu of the exercise by Owner of its remedies under Section
24(b) above in the case of a reletting of the Leased Property or with respect to
a sale of the Leased Property), the sum of (i) all unpaid Base Rental payable
for all Rental Periods through the Liquidated Damage Payment Date specified in
such notice, plus (ii) all unpaid Additional Rental due with respect to such
Leased Property as of the Liquidated Damage Payment Date, plus (iii) an amount
equal to the Termination Value computed as of the Rent Payment Date coincident
with or next preceding the Liquidated Damage Payment Date, plus (without
duplication) all interest, cost, fees, reimbursements and all other amounts due
and payable either to Owner or Senior Lender under the Transaction Documents,
and, on payment of such amounts, Owner shall convey the Leased Property to
Lessee as an Owner's Conveyance as provided in Section 32 below. If Owner elects
(or Lessee requires Owner to elect) to exercise the remedies set forth in this
Section 24(c) prior to March 1, 2001, unless the Senior Lender directs that the
Senior Loan be paid in full, the Lessee shall pay the Equity Balance to the
Owner pursuant to Section 29(c) hereof, in lieu of the exercise of the remedies
set forth in this Section 24(c), and upon the payment of the Equity Balance to
the Owner, Owner shall cause the membership interests in the Owner and the stock
interests in the managing member of the Owner to be transferred to the Lessee
(or its nominee). Lessee shall take any actions to enable the Lessee to acquire
the membership interests in the Owner and the stock interests in the managing
member of the Owner in accordance with the terms and provisions of the Senior
Loan Documents.
(d) Subject to Lessee's rights under Section 24(e) below, Owner may
exercise any other right or remedy which may be available to it under applicable
law or proceed by appropriate court action to enforce the terms hereof or to
recover damages for the breach hereof or to rescind this Lease. The remedies
herein conferred upon and reserved to the Owner are not intended to be exclusive
of any other available remedy or remedies which the Owner may have at law or in
equity, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Lease or now or hereafter
existing at law or in equity. No delay or omission to exercise any right or
power accruing upon any Event of Default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle the Owner to exercise any remedy reserved to it in this Section, it
shall not be necessary to give any notice, other than such notice as may be
required in this Section.
In addition, Lessee shall be liable for all costs and expenses, including
without limiting the generality of the foregoing, reasonable attorney's fees,
incurred by Owner or any Assignee by reason of the occurrence of any Event of
Default or the exercise of Owner's remedies with respect thereto, including all
costs and expenses incurred in connection with the surrender of the Leased
Property in accordance with Section 33 hereof or in placing the Leased Property
in the condition required by said Section. No express or implied waiver by
Owner of any Event of Default shall in any way be, or be construed to be, a
waiver of any future or subsequent Event of Default. To the extent permitted by
applicable law, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise which may require Owner to sell, lease or otherwise use the
Leased Property in mitigation of Owner's damages as set forth in this Section 24
or which may otherwise limit or modify any of Owner's rights and remedies in
this Section 24.
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Notwithstanding any provision contained in this Lease to the contrary, any
and all remedies available to Owner upon the occurrence of an Event of Default
shall survive the termination of this Lease.
(e) If the Owner notifies the Lessee that it elects to repossess the Leased
Property pursuant to Section 24(b) hereof, or, to terminate or rescind the
Lease pursuant to the provisions in Section 24(b) or (d) hereof or to exercise
its remedies under the Leasehold Deed of Trust, the Lessee shall be entitled to
require the Owner to exercise the remedies set forth in Section 24(c) hereof in
lieu of repossessing the Leased Property or in lieu of rescinding the Lease or
in lieu of exercising its remedies under the Leasehold Deed of Trust by
delivering to the Owner at any time during the Standstill Period written notice
of its election to have the Owner exercise its remedies under Section 24(c).
Unless the Owner specifies another date as the Liquidated Damage Payment Date
pursuant to the notice required under Section 24(c) hereof, the Liquidated
Damage Payment Date shall be the first Business Day after the last day of the
Standstill Period. If no notice of such election by Lessee is received by Owner
within the Standstill Period or if the required payments are not made on the
Liquidated Damage Payment Date, the Owner may pursue the remedies set forth in
Section 24(b) or Section 24(d) hereof or the remedies set forth in the Leasehold
Deed of Trust.
(f) When this Lease requires service of a notice, that notice shall replace
rather than supplement any equivalent or similar statutory notice, including any
notices required by California Code of Civil Procedure Section 1161 or any
similar or successor statute. When a statute requires service of a notice in a
particular manner, service of that notice (or a similar notice required by this
Lease) in the manner required by Section 28 shall replace and satisfy the
statutory service-of-notice procedures, including those required by California
Code of Civil Procedure Section 1162 or any similar or successor statute.
(g) In addition to and not in limitation of the foregoing, KCCI and SELCO,
as assignee of Owner, shall be entitled to pursue its remedies under the Owner
Pledge Agreement in conjunction with or independently of the exercise of any of
the remedies set forth herein after an Event of Default and any proceeds derived
therefrom shall be used to reduce the Equity Balance in accordance with the
Participation Agreement. Owner shall also be entitled to exercise its rights
under the Leasehold Deed of Trust, provided, however, that Lessee shall be
entitled to require the Owner to exercise the remedies set forth in Section
24(c) hereof if such election is made during the Standstill Period. If the
event of a conflict between the express provisions of this Lease and the express
provisions of the Leasehold Deed of Trust, the provisions this Lease shall
govern.
Section 25. Owner's Right to Perform for Lessee. If Lessee fails to make
-----------------------------------
any payment of Additional Rental required to be made by it hereunder or fails to
obtain the insurance required by Section 15 hereof or to otherwise perform or
comply with any of its material agreements contained herein, Owner may (but
shall not be required) itself, after written notice to Lessee, make such payment
or perform or comply with such agreement, and the amount of such payment and the
amount of the reasonable expenses of Owner incurred in connection with such
payment or the performance of or compliance with such agreement, together with
interest on all such amounts calculated at a per annum rate equal to the rate
equal to the Default Rate, shall be due and payable
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by Lessee upon demand by Owner; provided, however, that no such payment,
-------- -------
performance or compliance by Owner shall be deemed to cure or waive any Event of
Default hereunder.
Section 26. Expenses. Lessee agrees, whether or not the transactions
--------
contemplated by this Lease are consummated, but solely to the extent such are
incurred in connection with the transactions contemplated under the Transaction
Documents (i) to pay the fees and expenses of the Administrator (and any
successors or Administration) for ordinary or extraordinary services as
Administrator under the Administrator Agreement, including, without limitation,
the reasonable fees and expenses of its counsel, (ii) all fees and expenses of
the Owner, Senior Lender, SELCO, Healthcare Realty and KCCI including, without
limitation, the reasonable fees and expenses of their respective counsel and
(iii) to pay to or reimburse the Owner, Senior Lender, SELCO, Healthcare Realty
and KCCI for (A) the payment of lien searches, filing and transfer fees, and
taxes, fees and expenses relating to the titling and registration of and
recording of this Lease or any mortgage, collateral, assignment of leases and
rents, UCC financing statements and any other security documents with respect to
the Leased Property incurred by or on behalf the Owner, Senior Lender, SELCO,
Healthcare Realty and KCCI, (B) appraisal fees, engineering fees, environmental
assessments, title insurance fees, survey costs and (C) all other reasonable
fees and expenses which the Owner is obligated to pay in connection with the
negotiation and documentation of, and consummation of the transactions
contemplated by, and the ongoing performance of the various parties under this
Lease, the Senior Loan Documents, the other Transaction Documents, and any other
instruments and documents related to the transaction described in this Lease and
said other documents, including, without limiting the generality of the
foregoing, the organization and qualification of the Owner. The obligation of
Lessee to pay all such reasonable fees, expenses and other amounts shall survive
the termination of this Lease for any reason.
Section 27. Further Assurances. Lessee will promptly and duly execute and
------------------
deliver to Owner and any Assignee of Owner such other documents and assurances,
including, without limitation, such amendments to this Lease as may be
reasonably required by Owner and by any Assignee of Owner, and Uniform
Commercial Code financing statements and continuation statements, and will take
such further action as Owner or any Assignee of Owner may from time to time
reasonably request in order to carry out more effectively the intent and
purposes of this Lease and to establish and protect the rights and remedies
created or intended to be created in favor of Owner and of any Assignee of Owner
and their respective rights, title and interests in and to the Leased Property
or portions thereof.
Owner, at Lessee's sole cost and expense, will promptly and duly execute
and deliver to Lessee and any permitted assignee of Lessee such other documents
and assurances, including, without limitation, such amendments to this Lease as
may be reasonably required by Lessee and by any permitted assignee of Lessee,
and will take such further action as Lessee or any permitted assignee of Lessee
may from time to time reasonably request in order to carry out more effectively
the intent and purposes of this Lease and to establish and protect the rights
and remedies created or intended to be created in favor of Lessee and of any
permitted assignee of Lessee and their respective rights, title and interests in
and to the Leased Property or portions thereof.
Section 28. Notices. All notices provided for or required under the terms
-------
and provisions hereof shall be in writing, and any such notice shall be deemed
given (a) when personally delivered,
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(b) when deposited in the United States mails, with proper postage prepaid, for
first class certified mail, return receipt requested, (c) when delivered by an
overnight courier service, or (d) when received by the intended recipient if
sent by telecopy, provided that a copy of such notice also is delivered in the
manner permitted in subparagraphs (a), (b) or (c) of this Section 28, addressed
or sent (i) if to Owner or Lessee, at their respective addresses as set forth
below or at such other address as either of them shall, from time to time,
designate in writing to the other, and (ii) if to any Assignee, to the address
of such Assignee as such Assignee shall designate in writing to Owner and
Lessee.
If to Owner:
The Atrium of San Jose, Inc.
c/o Keycorp Leasing
54 State Street
Albany, NY 12207
Telecopy Number:
and
Wilmington Trust Company, administrator (name of Owner)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attn: Corporate Trust Administration
Telecopy Number: (302) 651-8882
If to Lessee:
Brookdale Living Communities of California, Inc.
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attn: Darryl W. Copeland, Jr.
Telecopy Number: 312 977-3699
with a copy to:
Brookdale Living Communities of California, Inc.
c/o Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attn: Robert J. Rudnik
Telecopy Number: 312 977-3769
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with a additional copy to:
Burke, Warren, MacKay & Serritella, P.C.
330 North Wabash Ave., 22nd Floor
Chicago, Illinois 60611
Attn: Douglas E. Wambach, Esq.
Telecopy Number: 312 840-7900
Copies of any notices sent either by or to Owner or Lessee shall be
delivered to Healthcare Realty at the following address:
Healthcare Realty Trust Incorporated
3310 West End Ave., Suite 700
Nashville, Tennessee 37203
Attn: Roger O. West
Telecopy Number: 615-269-8175
Section 29. Lessee's Extension Lease Options and End of Term Purchase
---------------------------------------------------------
Options.
- -------
(a) After the Basic Lease Term Expiration Date and each Extension Lease
Term (except the fifth Extension Lease Term) and if no Event of Default shall
have occurred and be continuing, Lessee shall be entitled to extend this Lease
annually for an Extension Lease Term of one (1) year provided that there shall
be no more than five (5) Extension Lease Terms in total. The first Extension
Lease Term will commence on the day immediately following the Basic Lease Term
Expiration Date, and each succeeding Extension Lease Term will commence on the
day immediately following the last day of the immediately preceding Extension
Lease Term. All of the provisions of this Lease shall be applicable during each
Extension Lease Term. Except during the fourth (4th) Extension Lease Term, this
Lease shall be deemed automatically extended for the succeeding Extension Lease
Term without the necessity of any notice or the taking of any other action
unless Lessee shall give written notice to Owner that Lessee does not elect to
extend the Term of this Lease for the next succeeding Extension Lease Term at
least three hundred and sixty-five (365) days prior to the last day of the then
current Term. Unless Lessee has exercised its purchase option under Section
29(b) hereof, in the event Lessee elects not to exercise an extension option the
Leased Property shall be returned to Owner in accordance with the provisions of
Section 34 hereof, in which case the provisions of Section 31(b) hereof shall
apply (unless delivered to a bidder in accordance with Section 30(b) hereof, in
which case the provisions of Section 31(a) shall apply). If the Leased Property
has not been so returned or delivered to Owner on the last day of the then
effective Basic Lease Term or Extension Lease Term, as the case may be, Lessee
shall pay Base Rental and Additional Rental payable as provided in Section 34(f)
hereof. If Lessee elects not to renew this Lease for an Extension Lease Term as
provided above, then during the three hundred sixty-five (365)-day period
preceding the date on which the then effective Basic Lease Term or Extension
Lease Term, as the case may be, shall terminate or expire, Owner may, subject to
Legal Requirements, place signs in locations on the grounds in front of the
Leased Property advertising that the same will be available for rent or
purchase. If Lessee has exercised its option to enter into an Extension Lease
Term ending on May 1, 2006, Lessee agrees that it will (x) effect a refinancing
of the Senior Loan on or before the maturity date for the Senior Loan (i.e.
February 1, 2006) in
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accordance with Section 19(e) hereof or (y) make a payment of Base Rental on
February 1, 2006 in an amount sufficient to pay the Senior Loan in full (and to
make payments of the other components of Base Rental which are due on such
date).
(b) Lessee shall be entitled, at its option, upon written notice to Owner,
as hereinafter provided, to purchase Owner's interest in the Leased Property in
accordance with Section 32 hereof, on any Rent Payment Date on or after March 1,
2001, for an amount equal to the Purchase Price applicable to the Basic Lease
Term or Extension Lease Term thereof then ending (i.e., the Termination Date).
To exercise said purchase option, Lessee shall give written notice to Owner to
such effect at least sixty (60) days prior to the Rent Payment Date upon which
such purchase is to be made, provided however, that Lessee shall be relieved of
its obligation to remarket the Leased Property during the Remarketing Period (as
defined in Section 39(a)) by giving Owner prior to the commencement of the
Remarketing Period written notice of its exercise of its right to purchase the
Leased Property on the last day of the then current Term.. If Lessee gives
written notice of its exercise of its right to purchase to Owner, such notice
shall constitute a binding obligation of Lessee to purchase the Leased Property
and to pay Owner the Purchase Price on the Termination Date. Notwithstanding
the provisions of Section 19 above, Lessee may freely assign its option to
purchase to any third party.
(c) Provided that the Lease is then not within a Remarketing Period, the
Lessee shall have the option on any Rent Payment Date to pay Owner the Equity
Balance (or so much thereof which represents the B Investor Loan and SELCO
Contribution) and reduce the Base Rental, Purchase Price, Termination Value and
End of Term Adjustment to reflect the repayment of the Investor Loans and the
SELCO Contribution. Lessee shall give Owner no less than thirty (30) days prior
written notice of its intent to pay the Equity Balance (or the portion thereof
representing the B Investor Loan and SELCO Contribution). The Owner and Lessee
agree that as soon as possible after the payment by the Lessee to the Owner of
the full Equity Balance, the Owner shall cause SELCO (or the then beneficial
owner of Owner) to transfer the membership interests in the Owner and the stock
in the managing member of Owner to Lessee (or its nominee) free and clear of any
Liens given to secure the A Investor Loan. Owner, Lessee and SELCO agree to
execute all documents which may be reasonably required to effectuate the
transfer of such membership interests and stock. As soon as possible after the
payment in full of the Equity Balance (or so much thereof which represents the B
Investor Loan and SELCO Contribution), Owner shall cause the Supplementatl
Collateral to be released from the Lien of the Owner Pledge Agreement and shall
direct the Custodian to return the Certificates of Deposit to Lessee.
Section 30. Third Party Sale of Leased Property.
-----------------------------------
(a) If Lessee does not exercise its option to enter into an Extension Term
or its option to purchase the Leased Property as of the last day of the then
current Term, then Lessee shall have the obligation during the final three
hundred sixty-five (365) days of the then current Term (the "Remarketing
Period"), to use such commercially reasonable efforts as would be made by a
self- interested property owner in the area to actively market commercial
property to obtain bona fide bids for the Leased Property from prospective
purchasers who are financially capable of purchasing the Leased Property for
cash on an as-is, where-is basis, without recourse to or warranty by Owner on
the terms and conditions set forth in Section 32 hereof applicable to Owner
Conveyances. The
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Lessee shall be responsible for hiring brokers who shall be reasonably
acceptable to Owner and promptly upon Owner's request, shall permit inspection
of the Leased Property and any maintenance records relating to the Leased
Property by Owner or any potential purchasers (subject, however, to any pre-
existing rights of any tenants or other occupants of the Leased Property), and
shall otherwise do all things necessary to sell and deliver possession of the
Leased Property to any purchaser. All such marketing of the Leased Property
shall be at Lessee's sole expense. The Lessee shall allow the Owner and any
potential purchaser access to the Leased Property for purposes of showing the
same (subject, however, to any pre-existing rights of any tenants or other
occupants of the Leased Property). All bids received by Lessee prior to the end
of the Basic Lease Term, or Extension Lease Term if applicable, shall be
immediately certified to Owner in writing, setting forth the amount of such bid
and the name and address of the person or entity submitting such bid.
Notwithstanding the foregoing, Owner shall have the right, but not the
obligation, to seek bids for the Leased Property during the Remarketing Period.
The obligation of Lessee to continue to pay Base Rental, Additional Rental and
any other amounts payable hereunder shall not abate during the Remarketing
Period.
(b) Delivery of Leased Property to Third Party Buyer. Not later than the
------------------------------------------------
Termination Date, Lessee shall deliver the Leased Property to the bidder, if
any, who shall have submitted such highest bid during the Remarketing Period,
and Owner shall simultaneously therewith sell (or cause to be sold), its
ownership in such Leased Property to such bidder, provided, that Owner shall not
--------
be obligated to sell the Leased Property if either (x) all of the conditions set
forth in Sections 32 and 33 have not been complied with on or before such
Termination Date or (y) the Net Proceeds of Sale of the Leased Property would be
less than the Maximum Owner Risk Amount applicable as of the Termination Date.
The Net Proceeds of Sale shall be retained by the Owner subject however to
Section 31(a).
(c) Delivery of Appraisals and Reports. Owner shall have the right in its
----------------------------------
sole discretion, but not the obligation, to retain a third party as its agent
for the purpose of determining compliance of the Lessee with the conditions
applicable to a return of the Leased Property pursuant to Section 34, at
Lessee's cost and expense. Upon the request of Owner and at Lessee's sole cost
and expense, Lessee shall provide Owner with a written report on or before the
fifteenth (15th) day after Owner's request which describes in reasonable detail
Lessee's efforts during the Remarketing Period to obtain bona fide bids for the
purchase of the Leased Property, including a list of all Persons approached for
the purpose of soliciting bids to purchase the Leased Property.
Section 31. End of Term Adjustment.
----------------------
(a) This Section 31(a) shall apply only if a sale of the Leased Property
has been consummated on or prior to the Termination Date pursuant to Section
30(b) hereof. If the Net Proceeds of Sale of the Leased Property from a sale to
a third party are less than the Purchase Price of the Leased Property as of such
Termination Date, Lessee shall, on the Termination Date, pay to Owner as an End
of Term Adjustment, in immediately available funds, an amount equal to such
deficiency (a "Deficiency") as an adjustment to the Rent payable under this
Lease; provided, however, that if all of the Limited Lessee Risk Conditions have
-------- -------
been met, the amount of the Deficiency payable by Lessee with respect to the
Leased Property shall not exceed the Maximum Lessee Risk Amount then applicable.
If the Net Proceeds of Sale of the Leased Property exceed the Purchase Price,
Owner shall pay to Lessee an amount equal to such excess as an adjustment to the
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Rent paid or payable under this Lease; provided, however, that Owner shall have
-------- -------
the right to offset against such adjustment payable by Owner, any other amounts
then due and payable from Lessee to Owner hereunder or under any other
agreements between Owner and Lessee. Lessee shall also pay to Owner on the
Termination Date the Base Rental due and payable for the Leased Property on the
Termination Date, plus all Additional Rental then due and owing to Owner.
Owner's obligation to sell (or cause to be sold) the Leased Property to a third
party under Section 30 is contingent upon the receipt of the amounts, if any,
payable by Lessee pursuant to this Section 31(a) and Section 31(c).
(b) If upon the expiration of the Basic Lease Term or any Extension Lease
Term or upon any Termination Date, (x) Lessee does not purchase the Leased
Property pursuant to Section 29 hereof or under Sections 16 or 24, if
applicable, (y) a third party sale is not consummated in accordance with Section
30 hereof, or (z) the Lessee does not extend the Term of the Lease by an
Extension Term pursuant to Section 29(a) hereof, then Lessee shall, on the
Termination Date, pay to Owner as an End of Term Adjustment, an amount equal to
one of the following amounts: (i) the Maximum Lessee Risk Amount then applicable
if all of the Limited Lessee Risk Conditions have been met, or (ii) the Purchase
Price, if all of the Limited Lessee Risk Conditions have not been met, plus, in
either case, the Base Rental due and payable on the Termination Date, plus all
Additional Rental then due and owing to Owner. The total selling price realized
from any sale of the Leased Property after the Termination Date shall be
retained by Owner. Lessee shall remain liable for the payment of, and upon the
consummation by Owner of the sale of the Leased Property after the Termination
Date, Lessee shall pay or reimburse Owner for the payment of, all applicable
sales, excise, transfer, recording or other taxes imposed as a result of such
sale, and fees and all expenses incurred by Owner as a result of such sale,
including, without limitation, expenses incurred in titling and registering the
conveyance of Owner's title to the Leased Property, title insurance fees and
expenses and reasonable fees and expenses of counsel, but the Lessee shall not
be required to pay or reimburse Owner for any tax based upon or measured solely
by Owner's or SELCO's gross, net or taxable income realized upon such sale or
any taxes payable in the nature of capital gains, unless any such tax is in lieu
of or a substitute for any sales, excise, transfer or recording taxes imposed as
a result of a sale of the Leased Property.
(c) [omitted]
(d) All amounts received by Owner upon the sale of the Leased Property or
as payment of the Purchase Price, End of Term Adjustment or Termination Value
shall be first applied to pay the Senior Loan in full prior to applying such
amounts to payment of Owner's Equity.
Section 32. Procedure for Owner Conveyance. In the event of an Owner
------------------------------
Conveyance, the terms and conditions of this Section 32 shall apply. On the
closing date for such transfer:
(i) The Owner shall have received all amounts due and payable to it
under the applicable provisions of this Lease, and without limitation of the
foregoing, Lessee shall have paid all Basic Rental and Additional Rental and all
other sums due and payable by Lessee under this Lease, through the date of
consummation of the transfer, in each case in funds of the type specified and
otherwise in accordance with Section 33 hereof.
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(ii) Each Owner's Conveyance shall be made by a good and sufficient grant
deed, subject to all matters of public record or apparent from an inspection or
survey, except as otherwise provided herein, or such other instruments as may be
appropriate in the circumstances, which shall transfer all of the Owner's
interest in the Leased Property to Lessee or third party, as the case may be.
OWNER'S TRANSFER OF ITS OWNERSHIP IN THE LEASED PROPERTY SHALL BE ON AN AS-IS,
WHERE-IS BASIS, WITHOUT ANY REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR
IMPLIED, AS TO THE DESIGN, CONDITION, QUALITY, CAPACITY, MERCHANTABILITY,
HABITABILITY, DURABILITY, SUITABILITY OR FITNESS OF THE LEASED PROPERTY FOR ANY
PARTICULAR PURPOSE, OR ANY OTHER MATTER CONCERNING THE LEASED PROPERTY OR ANY
PORTION THEREOF. LESSEE AND, IF APPLICABLE, ANY THIRD PARTY SHALL WAIVE ANY
CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT OR
INFRINGEMENT) IT MIGHT HAVE AGAINST OWNER FOR ANY LOSS, DAMAGE (INCLUDING
INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY THE LEASED PROPERTY OR
BY LESSEE'S LOSS OF USE THEREOF FOR ANY REASON WHATSOEVER. WITH RESPECT TO THE
EXCULPATION PROVIDED IN THIS SECTION 32, LESSEE WAIVES THE BENEFITS OF
CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
Owner shall convey all of its then right, title and interest in and to the
Leased Property to Lessee or third party, as the case may be, free and clear of
any Owner Liens (other than Permitted Liens), and any liens securing debt
incurred by Owner, whether recourse or otherwise, including but not limited to
the Senior Loan and any replacements for or additions to the foregoing, but NO
REPRESENTATION OR WARRANTY SHALL BE MADE BY OWNER AS TO THE EXISTENCE OF ANY
OTHER LIENS OR ENCUMBRANCES ON THE LEASED PROPERTY AS OF THE DATE OF SALE.
(iii) The Lessee shall have paid all charges and expenses incident to
the transfer of the Leased Property in an Owner's Conveyance, including, without
limitation, all transfer taxes, recording fees, title insurance premiums and
federal, state and local taxes arising as a result of such transfer. Lessee
shall have paid all reasonable fees and expenses of Owner's counsel and Senior
Lender's counsel incurred by reason of the transfer.
Section 33. Time of the Essence; Manner of Payment. The provisions of
--------------------------------------
this Lease requiring the payment by Lessee to the Owner or to any third party,
whether such payments are for Base Rental, Additional Rental, Termination Value,
Purchase Price, Equity Balance, End of Term Adjustment, Maximum Lessee Risk
Amount or otherwise are of the essence of this Lease, and time is of the essence
for any payment and performance of such obligations of Lessee set forth herein.
All payments to be made to Owner and Senior Lender hereunder shall be in
immediately available funds paid by wire transfer to an account designated by
Owner or Senior Lender, as applicable to the
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portion of any such amounts payable to the designating party, or at Owner's or
Senior Lender's request, by certified or cashier's check.
Section 34. Return of Leased Property.
-------------------------
(a) Subject to Section 16 hereof, upon the expiration or earlier
termination of the Term (unless Lessee has purchased the Leased Property
pursuant to Section 29 hereof), Lessee will vacate and surrender and deliver
possession of the Leased Property to Owner in broom clean condition and in the
condition required pursuant to Section 13(a) hereof. Lessee shall remove from
the Leased Property on or prior to such expiration or earlier termination of
this Lease, all personal property, furniture and fixtures (other than equipment
and fixtures which form a part of the building systems and any personal property
in which Owner has been granted a security interest pursuant to Section 10(b)
hereof or in which Senior Lender has been granted a security interest pursuant
to the Deed of Trust) situated thereon which is not the property of Owner, and
shall repair any damage caused by such removal. Property not so removed shall
become the property of Owner, and Owner may cause such property to be removed
from the Leased Property and disposed of, and Lessee shall pay the reasonable
cost of any such removal and disposition and of repairing any damage caused by
such removal.
(b) Except for surrender upon the expiration or earlier termination of the
Term hereof, no surrender to Owner of this Lease or of the Leased Property shall
be valid or effective unless agreed to and accepted in writing by Owner and any
Assignee of Owner.
(c) Without limiting the generality of the foregoing, upon the surrender
and return of the Leased Property to Owner pursuant to this Section 34, the
Leased Property shall (i) be capable of being immediately utilized by a third-
party purchaser or third-party lessee without further inspection, construction,
repair, replacement, alterations or improvements, licenses, permits, or
approvals, except for any of the foregoing required solely by virtue of the
change in ownership (other than to Owner or Assignee and except for any buildout
requirements that are unique to such new owner or lessee), use or occupancy of
the Leased Property, (ii) be in accordance and compliance with all Legal
Requirements and Environmental Legal Requirements including, without limitation,
any of the foregoing required by virtue of a change in ownership, use or
occupancy of the Leased Property other than to Lessee, (iii) be free and clear
of all Liens, other than (A) any Permitted Liens and Owner Liens and (B) any
liens securing debt incurred by Owner, whether recourse or otherwise, including
but not limited to the Senior Loan and any replacements for or additions to the
foregoing.
(d) On or prior to the date of such surrender and return of the Leased
Property, Owner shall have received from Lessee, at Lessee's expense, evidence
satisfactory to Owner and each Assignee, of compliance with the provisions of
this Section 34, including without limitation, an environmental assessment for
the Leased Property addressed in form and substance satisfactory to Owner and
each Assignee or, in lieu of addressing to such parties directly, accompanied by
a letter permitting Owner and each Assignee to rely thereon, performed by an
independent, licensed professional engineer satisfactory to Owner and each
Assignee, and which assessment (x) shall be sufficient in scope to determine
compliance with the applicable Environmental Legal Requirements, (y) shall
reveal no actual or potential environmental liabilities which cannot be
remediated by Lessee as provided in the following clause (z), and (z) if such
environmental assessment reveals the need for
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additional review, Lessee shall have provided such additional information or
environmental assessments as are required by Owner and each Assignee and,
subject to Section 20 hereof, any remediation recommended therein to be
performed shall have been performed, and evidence of compliance with Section
34(c)(ii).
(e) Upon such return of the Leased Property to Owner, Lessee shall deliver
to Owner a then current title insurance policy or a binding commitment to issue
Owner's and Lender's title insurance policies written by a title insurance
company reasonably acceptable to Owner and Senior Lender or endorsements to the
existing Owner's and Lender's Title Insurance, in each case, insuring good and
marketable title in the Leased Property in an amount equal to the Termination
Value determined as of the Termination Date, unencumbered except for Owner Liens
and Permitted Liens. Upon the request of Owner, Lessee shall continue for a
period not in excess of one hundred eighty (180) days to maintain its insurance
policies for the Leased Property required under Section 15 hereof if able to do
so on a commercially reasonable basis, provided that Owner pays or reimburses
Lessee for its pro rata costs thereof.
(f) Until the Leased Property has been returned to Owner in the condition
required under Section 34(a) through (d) hereof, Lessee shall continue to pay
Owner, on the same dates on which Base Rental was payable during the Basic Lease
Term or any Extension Lease Term thereof, 125% of the Base Rental that was
payable on the last Rent Payment Date plus, all Additional Rental for which
Lessee is liable applicable to such periods.
(g) The provisions of this Section 34 are of the essence of this Lease, and
any Material breach thereof shall be deemed an Event of Default hereunder, and
upon application to any court of equity having jurisdiction in the premises,
Owner shall be entitled to a decree against Lessee requiring specific
performance of the covenants of Lessee set forth in this Section 34.
Section 35. Financial Information.
---------------------
(a) Lessee agrees to furnish Owner and Senior Lender (i) as soon as
available, and in any event within 105 days after the last day of each fiscal
year of Lessee, a copy of the balance sheet of Lessee's Parent on a consolidated
basis as of the end of such fiscal year, and related consolidated statements of
income and retained earnings of Lessee's Parent for such fiscal year, certified
by an independent certified public accounting firm of recognized standing, each
on a comparative basis with corresponding statements for the prior fiscal year,
and a copy of Lessee's Parent's form 10-K, if any, filed with the Securities and
Exchange Commission for such fiscal year; (ii) within 50 days after the last day
of each fiscal quarter of Lessee's Parent (except the last such fiscal quarter),
a copy of the balance sheet as of the end of such quarter, and statement of
income and retained earnings covering the fiscal year to date of Lessee Parent
on a consolidated basis, each on a comparative basis with the corresponding
period of the prior year, all in reasonable detail and certified by the
treasurer or principal financial officer of Lessee's Parent, together with a
copy of Lessee's Parent's form 10-Q, if any, filed with the Securities and
Exchange Commission for such quarterly period; (iii) contemporaneously with its
transmittal to each stockholder of Lessee's Parent and to the Securities and
Exchange Commission, all such other financial statements and reports as Lessee's
Parent shall send to its stockholders and to the Securities and Exchange
Commission; (iv) as soon as available to Lessee's Parent, the notice of any
Material adjustment resulting from any audit of the books and/or
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records of Lessee's Parent by any taxing authority having jurisdiction over
Lessee's Parent; and (v) such additional financial information as Owner may
reasonably request concerning Lessee's Parent.
(b) Lessee agrees to and shall cause Lessee's Parent to prepare and deliver
the reports required under Section 1.18 of the Deed of Trust to Owner and Senior
Lender and shall permit the Senior Lender access to Lessee's books and records
as required thereby.
Section 36. Recording. Lessee and Owner will execute, acknowledge,
---------
deliver and cause to be recorded or filed in the manner and place required by
any present or future law, a memorandum hereof, and all other instruments,
including, without limitation, financing statements, continuation statements,
releases and instruments of similar character, which shall be reasonably
requested by Owner or any Assignee as being necessary or appropriate in order to
protect Owner's or Assignee's respective interests in the Leased Property or to
publish notice of or to create, maintain and protect the lien and security
interest intended to be created by the Deed of Trust and the other obligations
of Owner to Senior Lender upon, and the interest of Senior Lender in, the Leased
Property. If Lessee shall fail to comply with this Section 36, Owner shall be
and is hereby irrevocably appointed the agent and attorney in fact of Lessee, to
comply therewith, but this sentence shall not prevent any default in the
observance of this Section 36 by Lessee from constituting an Event of Default in
accordance with the provisions of this Lease. Lessee may record a memorandum of
this Lease whether or not requested by Owner.
Section 37. No Reliance. Lessee and Owner hereby mutually acknowledge
-----------
that in negotiating the terms of this Lease and all other related agreements and
documents, each has sought, obtained and relied exclusively upon such
accounting, actuarial, tax and legal advice from its own or other independent
sources as it has deemed necessary, and further acknowledges that neither
Lessee, Owner, Senior Lender, SELCO, Healthcare Realty, KCCI, the Administrator
or any Assignee nor any of their respective affiliates or personnel has
represented or warranted the legal, tax, economic, accounting, or other
consequences of the terms and provisions hereof and of the other related
agreements and documents.
Section 38. Miscellaneous. Any provision of this Lease which is
-------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating or diminishing Owner's or Lessee's rights under the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Lessee and Owner
hereby waives any provision of law which renders any provision of this Lease
prohibited or unenforceable in any respect. In no event shall any amounts
payable hereunder, whether payable as Base Rental, Additional Rental or
otherwise, exceed any limits imposed by applicable law. To the extent any
amounts received by Owner exceeds the maximum amount permitted, such payment
shall be credited to future Base Rental payable hereunder or at Owner's option,
be refunded to Lessee. No term or provision of this Lease may be amended,
altered, waived, discharged or terminated orally, but may be amended, altered,
waived, discharged or terminated only by an instrument in writing signed by a
duly authorized officer of the party against which the enforcement of the
amendment, alteration, waiver, discharge or termination is sought and consented
to in writing by the Senior Lender (while the Senior Loan is outstanding). No
amendment of any provision benefitting any Indemnitee hereunder shall be
effective to adversely
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affect such Indemnitee's right hereunder without the written consent of such
Indemnitee. A waiver on any one occasion shall not be construed as a waiver on a
future occasion. All of the covenants, conditions and obligations contained in
this Lease shall be binding upon and shall inure to the benefit of the
respective successors and assigns of Owner and (subject to the restrictions of
Section 19 hereof) Lessee. This Lease, the other Transaction Documents and each
related instrument, document, agreement and certificate, collectively constitute
the complete and exclusive statement of the terms of the agreement between Owner
and Lessee with respect to the leasing of the Leased Property, and cancel and
supersede any and all prior oral or written understandings with respect thereto.
Section 39. Venue; Governing Law. Lessee agrees that at Owner's sole
--------------------
election any suit, action or proceeding brought by Owner against Lessee in
connection with or arising out of this Lease may be brought in any federal or
state court in the State of California, and Lessee waives personal service of
all process upon it and consents that service of process may be made by mail or
messenger directed to it at its address set forth above and that service so made
shall be deemed to be completed upon the earlier of actual receipt or three (3)
days after the same shall have been posted to Lessee's said address. Nothing
herein contained shall affect Owner's right to serve legal process in any other
manner permitted by law or to bring any suit, action or proceeding against
Lessee or its property in the courts of any other jurisdiction. This Lease shall
in all respects be governed by, and constructed in accordance with, the laws of
the State of California, including all matter of construction, validity and
performance.
Section 40. Estoppel Certificate. Lessee agrees from time to time, upon
--------------------
not less than ten (10) days' prior written notice from Owner, Senior Lender,
SELCO, Healthcare Realty or KCCI, to execute, acknowledge and deliver to Owner,
Senior Lender, SELCO, Healthcare Realty or KCCI or any other Person designated
by Owner, Senior Lender, SELCO, Healthcare Realty or KCCI, a statement in form
and substance reasonably satisfactory to the Person requesting same certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that this Lease is in full force and effect as modified and
stating the modifications), the dates to which Base Rental and Additional Rental
have been paid, and stating whether or not, to the best knowledge of the signer
of the certificate, Owner is in default in performance of any covenant,
agreement or condition in this Lease and, if so, specifying each such default of
which the signer may have knowledge, it being intended that any such statement
may be relied upon by any prospective purchasers of the Leased Property, any
assignee of Owner, Senior Lender, SELCO, Healthcare Realty or KCCI or any
prospective mortgage lender. Owner agrees that at the reasonable request of the
Lessee it will provide the Lessee with a statement of the then current Equity
Balance and shall cooperate with Lessee in requesting that the Senior Lender
provide the Owner and Lessee with a statement of the then current balance of the
Senior Loan.
Section 41. Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
representations, warranties, agreements, covenants and obligations of Lessee
herein are material, shall be deemed to have been relied upon by Owner, and,
unless by their express terms expire as of an earlier date, shall survive and
continue in full force and effect notwithstanding the expiration or earlier
termination of this Lease in whole or in part, including the expiration or
termination of the Term with respect to the Leased Property.
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[SIGNATURES ON NEXT PAGE]
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[SIGNATURE PAGE FOR LEASE AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be duly
executed under seal by their duly authorized representatives effective as of the
date first written above.
The Atrium of San Jose LLC
(Owner)
By: The Atrium of San Jose, Inc.
By:________________________________
Title:_____________________________
Brookdale Living Communities of
California, Inc.
(Lessee)
By:________________________________
Title:_____________________________
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EXHIBIT A
Legal Description of Land
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Exhibit B
BASE RENTAL
-----------
There are four (4) components to Base Rental: (i) Senior Loan Debt
Service, (ii) A Investor Loan Debt Service, (iii) B Investor Loan Debt Service,
and (iv) SELCO Basic Rent.
(i) SENIOR LOAN DEBT SERVICE means (a) all interest payable on the
Senior Loan on any Senior Loan Payment Date, plus (b) the principal, if any,
payable on the Senior Loan as of such Senior Loan Payment Date, plus (c) all
premiums, make-whole amounts, prepayment penalties or any other charges or
payments due on the Senior Loan on such Senior Loan Payment Date, plus (d) any
sinking fund or other principal redemption payments due on such Senior Loan
Payment Date, plus (e) all other payments due under the Senior Loan Documents,
including but not limited to, late charges, default interest and other costs and
expenses incurred by Senior Lender in collecting the Senior Loan Debt Service.
Pursuant to the terms of the Senior Loan Documents, the Lessor is required
to make monthly payments in the amount of ONE HUNDRED THIRTY-FOUR THOUSAND EIGHT
HUNDRED EIGHTY-FOUR AND 43/100 DOLLARS ($134,884.43). All Senior Loan Debt
Service shall be paid directly to the Senior Lender on or before the same is due
under the Senior Loan Documents.
(ii) A INVESTOR LOAN DEBT SERVICE means (a) all interest payable on the A
Investor Loan on any A Investor Distribution Date (as defined in the
Participation Agreement), plus (b) the principal, if any, payable on the A
Investor Loan as of such A Investor Distribution Date, plus (c) all premiums,
make-whole amounts, prepayment penalties, any increased costs, yield protection
payments, late fees, default interest, and any other charges or other payments
due with respect to the A Investor Loan under the terms of the Participation
Agreement, plus (d) any sinking fund or other principal redemption payments due
on such A Investor Distribution Date.
(iii) B INVESTOR LOAN DEBT SERVICE means (a) all interest payable on the B
Investor Loan on any B Investor Distribution Date as defined in the
Participation Agreement, plus (b) the principal, if any, payable on the B
Investor Loan as of such B Investor Distribution Date, plus (c) all premiums,
make-whole amounts, prepayment penalties, any increased costs, yield protection
payments, late fees, default interest, and any other charges or other payments
due with respect to the B Investor Loan under the terms of the Participation
Agreement, plus (d) any sinking fund or other principal redemption payments due
on such B Investor Distribution Date.
(iv) SELCO BASIC RENT means an amount equal to the return payable on the
SELCO Contribution in accordance with Section 2.3 of the Participation
Agreement, together with all make-whole amounts, prepayment penalties, any
increased costs, yield protection payments, late fees, default interest and
other charges or other payments due with respect to the SELCO Contribution under
the terms of the Participation Agreement. SELCO Basic Rent shall be payable
quarterly in advance on each SELCO Distribution Date.
-55-
<PAGE>
The rights of the Owner, KCCI, SELCO and Healthcare Realty to receive
Equity Rental is subject to the rights of the Senior Lender under the Senior
Loan Documents while the Senior Loan is outstanding.
-56-
<PAGE>
EXHIBIT C
Termination Values and Purchase Prices
-57-
<PAGE>
EXHIBIT D
Maximum Lessee Risk Amounts and Maximum Owner Risk Amounts
-58-
<PAGE>
Schedule I
List of Listed Permits
[none]
-59-
<PAGE>
Schedule II
List of Acceptable Hazardous Waste
-60-
<PAGE>
Exhibit 10.2
This instrument prepared by
and when recorded return to:
Audrey A. Ellis, Esq.
Bilzin Sumberg Dunn Price & Axelrod LLP
2500 First Union Financial Center
Miami, Florida 33131-2336
________________________________________________________________________________
(Space Above For Recorder's Use Only)
NOTE AND DEED OF TRUST MODIFICATION
AND ASSUMPTION AGREEMENT
------------------------
(DLJ 1996-CF1)
(Loan No. 9690381)
THIS AGREEMENT ("Agreement") dated as of ____________, 1998, is
---------
entered into among LASALLE NATIONAL BANK, AS TRUSTEE FOR THE REGISTERED HOLDERS
OF DLJ MORTGAGE ACCEPTANCE CORP., COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1996-CF1 ("Lender"), having an address at 135 LaSalle Street, Suite 1625,
------
Chicago, Illinois 60603, Attn: Linda Wirfel; DLJ 1996-CF1; Loan No. 9690381;
ATRIUM VENTURE, a California limited partnership, having an address at 4121-A
Power Inn Road, Sacramento, California 95826, Attn.: Jeffrey A. Hallsten
("Original Borrower"); THE ATRIUM OF SAN JOSE LLC, a Delaware limited liability
-----------------
company, having an address at c/o SELCO Service Corp. Keycorp Leasing, 54 State
Street, Albany, NY 12207 ("New Borrower") and BROOKDALE LIVING COMMUNITIES OF
------------
CALIFORNIA, INC., a Delaware corporation, having an address at 77 West Wacker
Drive, Suite 4400, Chicago, Illinois 60601, Attn: Darryl W. Copeland, Jr.
("Tenant"). New Borrower's taxpayer identification number is 36-4174019.
------
Original Borrower and New Borrower are hereinafter sometimes collectively
referred to as "Borrower Parties."
----------------
PRELIMINARY STATEMENT
---------------------
A. Original Borrower is the current owner of fee title to that
certain real property (the "Land") and the buildings and improvements thereon
----
and the personal property incidental thereto (the "Improvements"), commonly
------------
known as the "The Atrium at San Jose" located in the County of Santa Clara,
State of California, more particularly described in EXHIBIT "A" attached hereto
and made a part hereof (the Land and the Improvements are hereinafter sometimes
collectively referred to as the "Project").
-------
<PAGE>
B. Lender is the current owner and holder of a loan ("Loan") in the
----
original principal amount of $18,400,000 evidenced by that certain Promissory
Note dated January 15, 1996 (the Promissory Note, as same may be renewed,
consolidated, replaced, extended, substituted, amended or otherwise modified,
shall hereinafter be referred to as the "Note") made by Original Borrower in
----
favor of Column Financial, Inc., a Delaware corporation ("Original Lender") in
---------------
the principal amount of $18,400,000 and secured by, among other things, (i) that
certain Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of January 15, 1996 (the "Deed of Trust") made by Original
-------------
Borrower in favor a trustee for the benefit of Original Lender and encumbering
the Project, recorded on January 18, 1996 in Book P168 at Page 871 in the
Official Records of Santa Clara County, California ("Records"); (ii) that
-------
certain Assignment of Leases and Rents dated as of January 15, 1996 ("Assignment
----------
of Rents") made by Original Borrower in favor of Original Lender, recorded on
- --------
January 18, 1996 in Book P168 at Page 939 in the Records; (iii) those certain
UCC-1 Financing Statements ("Financing Statements") reflecting Original
--------------------
Borrower, as Debtor and Original Lender, as Secured Party recorded on January
18, 1996 in Book P168 at Page 950 in the Records and filed on January 19, 1996
with the Office of the Secretary of State of California under File No. 96-
02260434; (iv) that certain Hazardous Substances Indemnity Agreement dated as of
January 15, 1996 ("Environmental Indemnity") made by Original Borrower, Jeffrey
-----------------------
A. Hallsten and H. James Griggs in favor of Original Lender; and (v) that
certain Indemnity and Guaranty Agreement dated as of January 15, 1996
("Guaranty") made by Jeffrey A. Hallsten and H. James Griggs in favor of
--------
Original Lender.
C. The Note, the Deed of Trust, the Assignment of Rents, the Financing
Statements, the Environmental Indemnity, the Guaranty, and any and all other
agreements, documents and instruments evidencing or securing the Loan referred
to in or contemplated by the foregoing specifically enumerated documents shall
hereinafter be collectively referred to as the "Loan Documents."
--------------
D. New Borrower desires to purchase the Project from Original Borrower and
to assume the obligations of Original Borrower under the Loan Documents.
E. New Borrower also desires to lease the entire Project to Tenant
pursuant to the terms of that certain Lease Agreement (the "Lease") dated as of
-----
the date hereof between New Borrower, as Lessor-Owner and Tenant, as Lessee-
Operator.
F. In order to secure its obligations under the Lease, Tenant has executed
and delivered to New Borrower, KCCI and SELCO a Pledge and Security Agreement
(Cash, Cash Equivalents and Investment Property) dated of even date herewith
(the "CD Pledge Agreement") pursuant to which Tenant pledged to New Borrower two
-------------------
certificates of deposits each issued by Fleet National Bank in the aggregate
amount of $6,900,000 (the "CDS") (the CDS, together with any replacements or
---
substitutions thereof and any other collateral pledged pursuant to the CD Pledge
Agreement, the "Supplemental Collateral").
-----------------------
-2-
<PAGE>
G. In connection with the purchase of the Project by New Borrower, the 99%
member of New Borrower, SELCO Service Corporation, an Ohio corporation ("SELCO")
-----
will be obtaining a loan (the "A Investor Loan") from Healthcare Realty Trust
---------------
Incorporated, a Maryland corporation ("Healthcare Realty") evidenced by a
-----------------
promissory note (the "A Investor Note") made by SELCO in favor of Healthcare
---------------
Realty and a loan (the "B Investor Loan") from Key Corporate Capital, Inc., a
---------------
Michigan corporation ("KCCI") evidenced by a promissory note (the "B Investor
---- ----------
Note") made by SELCO in favor of KCCI. The A Investor Loan and the B Investor
- ----
Loan shall be collectively referred to as the "Equity Loans."
------------
H. The A Investor Loan will be secured by a Pledge and Security
Agreement (the "Membership Interest and Stock Pledge Agreement") made by SELCO
----------------------------------------------
in favor of Healthcare Realty pursuant to which SELCO will pledge all of its
membership interest (the "Pledged Interests") in New Borrower and all of its
-----------------
interest in the issued and outstanding stock (the "Pledged Stock") of The Atrium
-------------
at San Jose, Inc., the managing member ("Managing Member") of New Borrower to
---------------
Healthcare Realty. SELCO's entering into the Membership Interest and Stock
Pledge Agreement is prohibited by the terms of the Deed of Trust without the
consent of Lender.
I. The B Investor Loan will be guaranteed by New Borrower pursuant to a
non-recourse guaranty (the "Guaranty") from New Borrower in favor of SELCO and
--------
KCCI, which Guaranty is secured by a pledge and non-recourse assignment to KCCI
and SELCO of all of New Borrower's right, title and interest in and to the CD
Pledge Agreement and the Supplemental Collateral. The Guaranty is prohibited by
the terms of Section 1.33 (d) of the Deed of Trust.
J. The respective rights of SELCO, Healthcare Realty, KCCI and New
Borrower with respect to the Equity Loans, the Pledged Interests, the Pledged
Stock and the Supplemental Collateral are set forth in a Loan and Participation
Agreement (the "Participation Agreement") entered into as of the date hereof
-----------------------
among SELCO, Healthcare Realty, KCCI and New Borrower.
K. The A Investor Note, the B Investor Note, the Membership Interest and
Stock Pledge Agreement, the Participation Agreement and the CD Pledge Agreement
and any and all other agreements, documents and instruments evidencing, securing
or in any manner relating to the Equity Loans shall hereinafter be collectively
referred to as the "Equity Loan Documents."
---------------------
L. A sale of the Project to and the assumption of the Loan by a third
party, the lease of the entire Project to Tenant by New Borrower and the
granting by New Borrower in favor of Tenant of an option to purchase the Project
or the interests of SELCO in New Borrower and Managing Member pursuant to the
terms of the Lease, the Membership Interest and Stock Pledge Agreement and the
Guaranty are all prohibited by the terms of the terms of the Deed of Trust
without the consent or waiver of Lender.
M. The Lender has agreed to consent to (i) Original Borrower selling the
Project to New Borrower, (ii) New Borrower assuming all of Original Borrower's
obligations under the Loan Documents, (iii) New Borrower entering into the Lease
of the entire Project with Tenant and New
-3-
<PAGE>
Borrower granting Tenant the option to purchase the Project or the interests of
SELCO in New Borrower and Managing Member pursuant to the terms of the Lease,
(iv) the Membership Interests and Stock Pledge Agreement, and (v) New Borrower
entering into the Guaranty (collectively, the "Requested Actions"), all on the
-----------------
terms and conditions hereinafter set forth.
In consideration of $10.00 paid by each of the parties to the other, the
mutual covenants set forth below, and other good and valuable consideration,
receipt and sufficiency of which are acknowledged, the parties agree as follows:
1
-
ACKNOWLEDGMENTS, WARRANTIES AND REPRESENTATIONS
-----------------------------------------------
1.1 ORIGINAL BORROWER REPRESENTATIONS. As a material inducement to Lender
---------------------------------
to enter into this Agreement and to consent to the Requested Actions, Original
Borrower acknowledges, warrants, represents and agrees to and with Lender as
follows:
(a) Authority of Original Borrower. Original Borrower is a duly
------------------------------
organized, validly existing limited partnership in good standing under the laws
of the State of California. Congregate Communities Corporation, a California
corporation is the only general partner of Original Borrower ("Original Borrower
-----------------
General Partner"). The execution, delivery, and performance of this Agreement
- ---------------
by Original Borrower has been duly and properly authorized pursuant to all
requisite partnership action. Original Borrower General Partner acting alone
without the joinder of any other partner of Original Borrower or any other party
has the power and authority to execute this Agreement on behalf of Original
Borrower and to duly bind Original Borrower under this Agreement. The
execution, delivery and performance of this Agreement by Original Borrower does
not and will not (i) violate any provision of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award presently in effect
having applicability to Original Borrower or the limited partnership agreement
of Original Borrower or (ii) result in a breach or constitute or cause a default
under any indenture, agreement, lease or instrument to which Original Borrower
is a party or by which the Project may be bound or affected.
(b) Authority of Original Borrower General Partner. Original Borrower
----------------------------------------------
General Partner is a duly organized, validly existing corporation in good
standing under the laws of the State of California. The execution and delivery
of, and performance under, this Agreement by Original Borrower General Partner
as general partner and on behalf of Original Borrower has been duly and properly
authorized pursuant to all requisite corporate action. Jeffrey A. Hallsten,
acting alone without the joinder of any other officer or director of Original
Borrower General Partner has the power and authority to execute this Agreement
on behalf of and to duly bind Original Borrower under this Agreement. The
execution, delivery or performance of this Agreement by Original Borrower
General Partner will not (i) violate any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award presently in
effect having applicability to Original Borrower General Partner or the articles
of incorporation or by-laws of Original Borrower General Partner or (ii) result
in a breach of or constitute or cause a default under any indenture,
-4-
<PAGE>
agreement, lease or instrument to which Original Borrower General Partner is a
party or by which the Project may be bound or affected.
(c) Compliance with Laws. Original Borrower has not received any
--------------------
written notice from any governmental entity claiming that Original Borrower or
the Project is not presently in compliance with any laws, ordinances, rules and
regulations bearing upon the use and operation of the Project, including,
without limitation, any notice relating to zoning laws or building codes or
regulations.
(d) Rent Roll. The Rent Roll ("Rent Roll") attached hereto and made a
--------- ---------
part hereof as EXHIBIT "B" is a true, complete and accurate summary of all
tenant leases affecting the Project as of the date of this Agreement.
(e) Title to Project and Legal Proceedings. Original Borrower is the
--------------------------------------
current owner of fee title in the Project. Except for the action pending
against New Borrower and other parties in the Santa Clara Superior Court, styled
Fertig v. Floral Spectrum, Margie McMillan, individually and d/b/a Floral
- -------------------------------------------------------------------------
Spectrum, Richard McMillan individually and d/b/a Floral Spectrum, The Atrium
- -----------------------------------------------------------------------------
and Does 1 to 20 under Case No. CV769755 (the "Pending Action"), there are no
- ---------------- --------------
pending or, to the best of Original Borrower's knowledge, threatened suits,
judgments, arbitration proceedings, administrative claims, executions or other
legal or equitable actions or proceedings against Original Borrower or the
Original Borrower General Partner or the Project, or any pending or threatened
condemnation proceedings or annexation proceedings affecting the Project, or any
agreements to convey any portion of the Project, or any rights thereto to any
person or entity not disclosed in this Agreement, including, without limitation,
any government or governmental agency.
(f) Seismic Repair. Original Borrower has completed all items of
--------------
Seismic Repair work identified in the Report of Seismic Design Consultants, Inc.
dated November 27, 1995 (Job Number 23-11-95-57). In connection with the
foregoing, Original Lender has released and paid to and Original Borrower has
received the $1,250.00 held back at the Loan closing for completion of such
work.
1.2 ACKNOWLEDGMENTS, WARRANTIES AND REPRESENTATIONS OF NEW BORROWER. As a
---------------------------------------------------------------
material inducement to Lender to enter into this Agreement and to consent to the
Requested Actions, New Borrower acknowledges, warrants, represents and agrees to
and with Lender as follows:
(a) Authority of New Borrower. New Borrower is a duly organized,
-------------------------
validly existing limited liability company in good standing under the laws of
the State of Delaware and is authorized to transact business under the laws of
the State of California. The only members of Borrower are SELCO and the
Managing Member. The execution and delivery of, and performance under, this
Agreement by New Borrower has been duly and properly authorized pursuant to all
requisite limited liability company action. The Managing Member, acting alone
without the joinder of any other member or other officer or director of New
Borrower or any other party has the power
-5-
<PAGE>
and authority to execute this Agreement on behalf of and to duly bind New
Borrower under this Agreement and the Loan Documents. Neither the execution,
delivery or performance of this Agreement nor the performance under the Loan
Documents by New Borrower will (i) violate any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to New Borrower or the limited
liability company agreement of New Borrower or (ii) result in a breach of or
constitute or cause a default under any indenture, agreement, lease or
instrument to which New Borrower is a party or by which the Project may be bound
or affected.
(b) Authority of Managing Member. Managing Member is a duly
----------------------------
organized, validly existing corporation in good standing under the laws of the
State of Delaware. The execution and delivery of, and performance under, this
Agreement by Managing Member and on behalf of New Borrower has been duly and
properly authorized pursuant to all requisite corporate action.
________________ acting alone without the joinder of any other officer or
director of Managing Member has the power and authority to execute this
Agreement on behalf of and to duly bind New Borrower under this Agreement. The
execution, delivery or performance of this Agreement by Managing Member will not
(i) violate any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to Managing Member or the articles of incorporation or by-laws of
Managing Member or (ii) result in a breach of or constitute or cause a default
under any indenture, agreement, lease or instrument to which Managing Member is
a party or by which the Project may be bound or affected.
(c) Pledge of Interests. Except for SELCO's pledge of the Pledged
-------------------
Interests and the Pledged Stock to Healthcare Realty, and except for the
transfers described in Sections 3.3 and 3.4 hereof, neither SELCO nor the
Managing Member has pledged, sold, conveyed or otherwise encumbered or
transferred their membership interests in New Borrower or the stock of Managing
Member and will not pledge, sell, convey or otherwise encumber or transfer their
membership interest in New Borrower or the stock of Managing Member without the
consent of Lender in accordance with and as required by Section 1.13 of the Deed
of Trust.
(d) Financial Statements. The financial statements and other
--------------------
information regarding SELCO and Healthcare Realty (collectively, the "Financial
---------
Statements") which have been previously delivered to Lender are true, complete
- ----------
and accurate in every material respect and accurately represent the financial
condition of SELCO through March 31, 1998, and Healthcare Realty through the
first quarter of 1998. There has not been any material adverse change to the
financial condition of SELCO or Healthcare Realty between the dates of the
Financial Statements and the date of this Agreement. SELCO, Healthcare Realty
and New Borrower acknowledge that the Financial Statements have been provided to
Lender to induce Lender to enter into this Agreement and are being relied upon
by Lender for such purposes.
(e) Assets of New Borrower. The only assets of New Borrower are the
----------------------
Project, cash and the CDs pledged to it by Tenant described in and pursuant to
the CD Pledge Agreement.
-6-
<PAGE>
(f) No Default. Neither New Borrower nor SELCO is in default and
----------
neither New Borrower nor SELCO has received notice of default from Tenant under
the Lease or from Healthcare Realty or KCCI under any of the Equity Loan
Documents.
(g) Bankruptcy. New Borrower covenants and agrees that in the event
----------
the Project or any portion thereof or interest therein becomes the property of
any bankruptcy estate or the subject of any proceeding for relief, protection,
reorganization, liquidation, dissolution or similar relief for debtors under any
local, state, federal or other insolvency law or laws providing relief for
debtors, then Lender shall immediately become entitled, in addition to other
relief to which Lender may be entitled under this Agreement, the Loan Documents,
in equity or at law, and without further notice or action of any kind, to obtain
(i) an order from the bankruptcy court granting immediate relief from the
automatic stay pursuant to Section 362 of the Bankruptcy Code so as to permit
Lender to foreclose upon the Project, and to exercise all other rights and
remedies of Lender, under Loan Documents, this Agreement, in equity or at law,
and (ii) an order from the bankruptcy court prohibiting New Borrower's use of
all "cash collateral" (as defined in Section 363 of the Bankruptcy Code). In
connection with such order for relief, New Borrower shall not allege or contend
(1) that the prior market value of the Project is more than the indebtedness
outstanding under the Loan and evidenced and secured by the Loan Documents as of
said date, and (2) that there is a reasonable likelihood of an effective
reorganization.
(h) New Borrower's Organizational Documents. New Borrower is and
---------------------------------------
will remain in compliance with, and its organizational documents do not conflict
with any of the requirements of Section 1.33 of the Deed of Trust. New Borrower
is not and will not be in violation of any of the terms, covenants, conditions
or other provisions of its organizational documents.
1.3 ACKNOWLEDGMENTS, WARRANTIES AND REPRESENTATIONS OF BORROWER PARTIES.
-------------------------------------------------------------------
As a material inducement to Lender to enter into this Agreement and to consent
to the Requested Actions, Original Borrower and to the knowledge of New Borrower
(except as to Sections 1.3(a), 1.3(b) (relating to New Borrower only), as
applicable, and 1.3(c) (relating to New Borrower only) which is not limited to
New Borrower's knowledge), acknowledge, warrant, represent and agree to and with
Lender as follows:
(a) Indebtedness. As of May 5, 1998, the outstanding principal
------------
balance of the Loan which is being assumed by New Borrower is $18,035,397.88.
In addition, the following escrow and reserve balances are being held by Lender
as of the date hereof: (i) a tax escrow balance of $0; (ii) an insurance escrow
balance of $40,115.91; and (iii) a replacement reserve balance of $57,457.97.
Original Borrower, New Borrower and Lender acknowledge and agree that Lender
will continue to hold and disburse the escrow and reserve balances for the
benefit of New Borrower in accordance with the terms of the Loan Documents. By
its execution hereof, Lender represents and warrants that to Lender's actual
knowledge, (i) the foregoing amounts are correct, (ii) the Loan is not
-7-
<PAGE>
in default, (iii) all interest and principal payments due under the Loan
Documents through and including May 1, 1998 have been paid, and (iv) there are
no written amendments to or modifications of the Loan Documents.
(b) Loan Documents. The Loan Documents constitute valid and legally
--------------
binding obligations of Original Borrower and, from and after the date hereof are
valid and legally binding obligations of New Borrower enforceable against New
Borrower and the Project in accordance with their terms except as such
enforceability may be affected by applicable bankruptcy or insolvency laws or
laws affecting the enforcement of creditors' rights or remedies generally.
Borrower Parties have no defenses, setoffs, claims, counterclaims or causes of
action of any kind or nature whatsoever against Lender or any of Lender's
officers, directors, servicers or predecessors in interest with respect to (i)
the Loan, (ii) the Loan Documents, (iii) the "secured indebtedness" or the
"indebtedness secured hereby" (as such term is defined in the Deed of Trust),
(iv) any other documents or instruments now or previously evidencing, securing
or in any way relating to the Loan, (v) the administration or funding of the
Loan or (vi) the development, operation or financing of the Project. To the
extent any of Borrower Parties would be deemed to have any such defenses,
setoffs, claims, counterclaims or causes of action, Borrower Parties waive and
relinquish them. New Borrower and by its execution hereof, Tenant, acknowledge
that they have received copies of all of the Loan Documents. In addition, by
its execution hereof, Tenant consents to New Borrower waiving and relinquishing
any such defenses, setoffs, claims, counterclaims or causes of action.
(c) Further Assurances. Borrower Parties shall execute and deliver to
------------------
Lender such agreements, instruments, documents, financing statements and other
writings as may be reasonably requested from time to time by Lender to perfect
and to maintain the perfection of Lender's security interest in and to the
Project, and to consummate the transactions contemplated by or in the Loan
Documents and this Agreement.
1.4 ACKNOWLEDGMENTS, WARRANTIES AND REPRESENTATIONS OF TENANT. As a
---------------------------------------------------------
material inducement to Lender to enter into this Agreement and to consent to the
Requested Actions, Tenant acknowledges, warrants, represents and agrees to and
with Lender as follows:
(a) Authority of Tenant. Tenant is a duly organized, validly
-------------------
existing corporation in good standing under the laws of the State of Delaware
and is duly authorized to transact business in the State of California. The
execution and delivery of, and performance under, this Agreement by Tenant has
been duly and properly authorized pursuant to all requisite corporate action.
Any of Mark Schulte, Darryl W. Copeland, Jr. or Craig Walczyk acting alone
without the joinder of any other officer or director of Tenant has the power and
authority to execute this Agreement on behalf of and to duly bind Tenant under
this Agreement. The execution, delivery or performance of this Agreement by
Tenant will not (i) violate any provision of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award presently in effect
having applicability to Tenant or the articles or certificate of incorporation
or by-laws of Tenant or (ii) result in a breach of or constitute or cause a
default under any indenture, agreement, lease or instrument to which Tenant is a
party.
-8-
<PAGE>
(b) Compliance with Laws. To Tenant's knowledge, all permits,
--------------------
licenses or other evidences of authority to use and operate the Project as it is
presently being operated and as contemplated by the Lease are current, valid and
in full force and effect.
(c) Lease. The Lease is in full force and effect and enforceable in
-----
accordance with its terms; neither Tenant nor, to Tenant's knowledge, New
Borrower is in default in the observance or performance of any condition or
agreement to be observed or performed by Tenant in advance; no Basic Rental or
Additional Rent (as such terms are defined in the Lease) or any other sums due
under the Lease have been waived, released, reduced, discounted or otherwise
discharged or compromised by New Borrower; and Tenant has not received notice of
any other assignment of New Borrower's interest in the Lease.
(d) Payments of Basic Rental and Additional Rental. Tenant agrees to
----------------------------------------------
timely pay and deliver to Lender (or its designee), without any offset,
deduction, defense, abatement, diminution or counterclaim, all components of
Basic Rental and any and all components of Additional Rental or any other sums
due under the Lease which, by its terms, the Lease requires Tenant to pay
directly to Lender, as "Senior Lender" under the Lease. In addition, upon the
receipt by Tenant of a written notice (the "Rent Payment Notice") from Lender or
-------------------
from a receiver for the Project that there has been a default which has not been
cured during any applicable cure period under the Loan Documents notwithstanding
notice to Tenant of such default, and that all components of Basic Rental and
Additional Rental and all other payments due from Tenant under the Lease,
including without limitation, the End of Term Adjustment, the Equity Rental, the
Purchase Price, and the Termination Value are to be paid to Lender or to the
receiver until the Loan has been paid in full, Lessee shall pay to Lender all of
such sums, notwithstanding anything in the Equity Loan Documents or the Lease to
the contrary or any contrary instruction, direction or assertion of New
Borrower. New Borrower irrevocably directs and authorizes Tenant to comply with
any Rent Payment Notice, and New Borrower releases and discharges Tenant from
any liability to New Borrower, on account of such payments. After the Loan has
been paid in full, Lender shall return any excess funds received from Tenant to
New Borrower and the delivery by Lender to New Borrower of any such excess funds
shall be deemed to be a full release of Lender by New Borrower. Neither the
acceptance of the Basic Rental and the Additional Rental or any other payments
due directly to Lender under the Lease nor the delivery by Lender or the
receiver to Tenant of a Rent Payment Notice, or Tenant's compliance therewith
shall operate to place responsibility for the control, care, management or
repair of the Project upon Lender, nor for the performance of any of the terms
and conditions of the Lease, nor shall it operate to make Lender responsible for
any waste committed on the Project by the Tenant, any sub-tenant or any other
party or for any dangerous or defective condition of the Project or for any
negligence in the management, upkeep, repair or control of the Project.
Further, Lender's acceptance of any sums due under the Lease pursuant to the
Rent Payment Notice or otherwise directly from Tenant shall not affect or
otherwise diminish the indemnity or any other provisions set forth in the
Assignment of Rents except to the extent such sums paid to Lender satisfy the
obligations of New Borrower under the Loan Documents. Tenant shall be entitled
to rely on any Rent Payment Notice. Tenant's compliance with a Rent Payment
-9-
<PAGE>
Notice shall not be deemed to violate the Lease. Tenant shall be entitled to
full credit under the Lease for any sums paid to Lender pursuant to a Rent
Payment Notice to the same extent as if such sums were paid directly to New
Borrower, as Owner under the Lease.
(e) Assets of Tenant. The only assets of Tenant are the right to use,
----------------
occupy, operate and purchase the Project pursuant to the Lease, cash and the CDs
which Tenant has pledged to New Borrower pursuant to the CD Pledge Agreement.
(f) No Default. Tenant is not in default and has not received notice
----------
of default from New Borrower under the Lease, the CD Pledge Agreement or any of
the other Equity Loan Documents.
(g) Financial Statements. The financial statements and other
--------------------
information regarding Tenant's Parent (the "Parent Financial Statements") which
---------------------------
have been previously delivered to Lender are true, complete and accurate in
every material respect and accurately represent the financial condition of
Tenant's Parent through December 31, 1997. There has not been any material
adverse change to the financial condition of Tenant or Tenant's Parent between
the dates of the Parent Financial Statements and the date of this Agreement.
Tenant, Tenant's Parent and New Borrower acknowledge that the Parent Financial
Statements have been provided to Lender to induce Lender to enter into this
Agreement and are being relied upon by Lender for such purposes.
(h) Bankruptcy. Tenant covenants and agrees that in the event the
----------
Project or any portion thereof or interest therein becomes the property of any
bankruptcy estate or the subject of any proceeding for relief, protection,
reorganization, liquidation, dissolution or similar relief for debtors under any
local, state, federal or other insolvency law or laws providing relief for
debtors, then Lender shall immediately become entitled, in addition to other
relief to which Lender may be entitled under this Agreement, the Loan Documents,
in equity or at law, and without further notice or action of any kind, to obtain
(i) an order from the bankruptcy court granting immediate relief from the
automatic stay pursuant to Section 362 of the Bankruptcy Code so as to permit
Lender to foreclose upon the Project, and to exercise all other rights and
remedies of Lender, under Loan Documents, this Agreement, in equity or at law,
and (ii) an order from the bankruptcy court prohibiting Tenant's use of all
"cash collateral" (as defined in Section 363 of the Bankruptcy Code). In
connection with such order for relief, Tenant shall not allege or contend (1)
that the prior market value of the Project is more than the indebtedness
outstanding under the Loan and evidenced and secured by the Loan Documents as of
said date, and (2) that there is a reasonable likelihood of an effective
reorganization.
(i) Title to Project and Legal Proceedings. To the best of knowledge
--------------------------------------
of Tenant, except for the Pending Action, there are no pending or threatened
suits, judgments, arbitration proceedings, administrative claims, executions or
other legal or equitable actions or proceedings against Tenant or the Project,
or any pending or threatened condemnation proceedings or annexation proceedings
affecting the Project, or any agreements to convey any portion of the
-10-
<PAGE>
Project, or any rights thereto to any person or entity not disclosed in this
Agreement, including, without limitation, any government or governmental agency.
(j) To Tenant's knowledge, the Rent Roll ("Rent Roll") attached
---------
hereto and made a part hereof as EXHIBIT "B" is a true, complete and accurate
summary of all tenant leases affecting the Project as of the date of this
Agreement.
1.5 REAFFIRMATIONS. Original Borrower reaffirms and, to the best of New
--------------
Borrower's knowledge, New Borrower affirms and confirms the truth and accuracy
of all representations and warranties set forth in Section 1.1 of the Deed of
Trust as if made on the date hereof except for the representations made in
Section 1.1 (c) and 1.1 (o) of the Deed of Trust, which Original Borrower
reaffirms is true and accurate as of the date made and not as of the date
hereof. Original Borrower acknowledges and agrees that nothing contained in this
Agreement, nor New Borrower's assumption of Original Borrower's obligations
under the Loan Documents, shall release Original Borrower from the agreements,
obligations, duties, liabilities, covenants and undertakings arising prior to
the date upon which New Borrower acquires title to the Project and assumes the
Loan pursuant to the terms of this Agreement.
2
-
COVENANTS OF BORROWER PARTIES AND TENANT
----------------------------------------
2.1 ASSUMPTION OF LOAN. New Borrower hereby assumes the obligation to
------------------
pay the indebtedness due under the Loan and all of Original Borrower's other
obligations, as grantor, trustor, mortgagor, borrower, indemnitor, guarantor, or
maker, as the case may be, under the Loan Documents to the same extent as if New
Borrower had signed such instruments, rather than Original Borrower. New
Borrower agrees to comply with and be bound by all the terms, covenants and
agreements, conditions and provisions set forth in the Loan Documents.
2.2 LENDER'S COSTS FOR EQUITY LOANS. New Borrower shall pay Lender,
-------------------------------
within ten (10) days of demand, for all costs and expenses incurred by Lender
during the term of the Loan, including without limitation, reasonable attorney's
fees in connection with Lender's monitoring, reviewing, or interpreting and
enforcing its rights under the Equity Loan Documents. Any sums due under this
Section, together with any interest thereon if not timely paid, shall be
secured by the Deed of Trust.
2.3 ASSUMPTION FEE. Simultaneously with the execution hereof, Tenant on
--------------
behalf of New Borrower shall pay or cause to be paid to Lender an assumption
fee equal to $7,500.
2.4 CONSENT FEE Simultaneously with the execution hereof, Borrower
-----------
Parties and Tenant shall pay or cause to be paid to Lender a fee for Lender's
consent to the Requested Actions equal to $180,353.98.
-11-
<PAGE>
2.5 RELEASE AND COVENANT NOT TO SUE - ORIGINAL BORROWER. Original
---------------------------------------------------
Borrower, on behalf of itself and all of its heirs, successors and assigns,
remise, release, acquit, satisfy and forever discharge Lender or any of Lender's
predecessors in interest and any subsidiary or affiliate of Lender or any of
Lender's predecessors in interest, and all of the past, present and future
officers, directors, contractors, employees, agents, servicers (including, but
not limited to, Lennar Partners, Inc.), attorneys, representatives,
participants, successors and assigns of Lender and Lender's predecessors in
interest (collectively, "Lender Parties") from any and all manner of debts,
--------------
accountings, bonds, warranties, representations, covenants, promises, contracts,
controversies, agreements, liabilities, obligations, expenses, damages,
judgments, executions, actions, inactions, claims, demands and causes of action
of any nature whatsoever, at law or in equity, known or unknown, either now
accrued or subsequently maturing, which Original Borrower now has or hereafter
can, shall or may have by reason of any matter, cause or thing, from the
beginning of the world to and including the date of this Agreement, including,
without limitation, matters arising out of or relating to (a) the Loan,
including, but not limited to, its administration or funding, (b) the Loan
Documents, (c) the assumption of the Loan by New Borrower, (d) the consent by
Lender to the Requested Actions, (e) the secured indebtedness described in the
Loan Documents, (f) the Indebtedness described in Section 1.3 hereof, (g) any
other agreement or transaction between any of Borrower Parties and any of Lender
Parties, and (h) the Project or its development, financing and operation.
Original Borrower for itself and all of its successors and assigns, covenant and
agree never to institute or cause to be instituted or continue prosecution of
any suit or other form of action or proceeding of any kind or nature whatsoever
against any of Lender Parties by reason of or in connection with any of the
foregoing matters, claims or causes of action arising through and including the
date of this Agreement.
As further consideration for the agreements herein contained, Original
Borrower hereby agree, represent and warrant that the matters released in this
Agreement are not limited to matters which are known or disclosed, and Original
Borrower hereby waives any and all rights and benefits with respect to any
matters arising out of or relating to matters arising out of or relating to (a)
the Loan, including, but not limited to, its administration or funding, (b) the
Loan Documents, (c) the secured indebtedness described in the Loan Documents,
(d) the assumption of the Loan by New Borrower, (e) the consent by Lender to
the Requested Actions, (f) the Indebtedness described in Section 1.3 hereof, (g)
any other agreement or transaction between any of Borrower Parties and any of
Lender Parties, and (h) the Project or its development, financing and operation
which Original Borrower now has, or in the future may have conferred upon
Original Borrower by virtue of the provisions of Section 1542 of the Civil Code
of the State of California which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
-12-
<PAGE>
In this connection, Original Borrower hereby agrees, represents, and
warrants that it realizes and acknowledges that factual matters now unknown to
Original Borrower may have given or may hereafter give rise to causes of action,
claims, demands, debts, controversies, damages, costs, losses and expenses which
are presently unknown, unanticipated and unsuspected, and Original Borrower
further agrees, represents and warrants that the release herein contained has
been negotiated and agreed upon in light of that realization and that Original
Borrower nevertheless hereby intends to release, discharge and acquit all
parties so released from any such unknown claims.
2.6 RELEASE AND COVENANT NOT TO SUE - NEW BORROWER AND TENANT. New
---------------------------------------------------------
Borrower and Tenant, jointly and severally, on behalf of themselves and all of
their respective heirs, successors and assigns, remise, release, acquit, satisfy
and forever discharge Lender Parties from any and all manner of debts,
accountings, bonds, warranties, representations, covenants, promises, contracts,
controversies, agreements, liabilities, obligations, expenses, damages,
judgments, executions, actions, inactions, claims, demands and causes of action
of any nature whatsoever, at law or in equity, either now accrued or
subsequently maturing (but only as to matters arising prior to or on the date of
this Agreement), which New Borrower or Tenant now has or hereafter can, shall or
may have by reason of any matter, cause or thing, from the beginning of the
world to and including the date of this Agreement, including, without
limitation, matters arising out of or relating to (a) the Loan, including, but
not limited to, its administration or funding, (b) the Loan Documents, (c) the
assumption of the Loan by New Borrower, (d) the consent by Lender to the
Requested Actions, (e) the secured indebtedness described in the Loan Documents,
(f) the Indebtedness described in Section 1.3 hereof, (g) any other agreement or
transaction between any of Borrower Parties or Tenant and any of Lender Parties,
and (h) the Project or its development, financing and operation. New Borrower
and Tenant for themselves and all of their respective successors and assigns,
covenant and agree never to institute or cause to be instituted or continue
prosecution of any suit or other form of action or proceeding of any kind or
nature whatsoever against any of Lender Parties by reason of or in connection
with any of the foregoing matters, claims or causes of action arising through
and including the date of this Agreement.
2.7 ASSIGNMENT OF LEASES. To the extent that Tenant has any right, title
--------------------
or interest in, to or under any of the "Leases" or "Rents" described in the
Assignment of Rents, Tenant, subject to the terms of the Assignment of Rents,
hereby irrevocably, absolutely and unconditionally transfers, sells, assigns,
pledges and conveys to Lender, its successors and assigns, all of Tenant's
right, title and interest in, to or under any of such Leases or Rents. Tenant
further agrees to comply with all of the terms and provisions of the Assignment
of Rents as if it were the Assignor thereunder with the exception that Tenant
shall be entitled to pay SELCO Basic Rent (as such term is defined in the Lease)
under the Lease on a quarterly basis notwithstanding any provision in the
Assignment of Rents to the contrary. New Borrower consents to the foregoing
assignment by Tenant to Lender and acknowledges and agrees that notwithstanding
such assignment by Tenant, New Borrower shall not be relieved of any of its
obligations under the Assignment of Rents notwithstanding anything in the
Assignment of Rents to the contrary.
-13-
<PAGE>
2.8 MANAGEMENT OF PROJECT. Tenant shall personally manage the Project
----------------------
in its own name and for its own account. Neither New Borrower nor Tenant has
engaged and has no present intention of engaging any affiliate of New Borrower,
Tenant or any third party to manage the Project for or on behalf of New Borrower
or Tenant. New Borrower and Tenant further covenant and agree to comply with all
terms and conditions of the Deed of Trust concerning the management of the
Project, including without limitation the obligation to obtain Lender's consent
to the management of the Project by any entity other than New Borrower or
Tenant.
2.9 PAYMENT OF TRANSACTION COSTS AND EXPENSES. New Borrower shall have
-----------------------------------------
paid or shall pay at the time of execution of this Agreement by Lender: (i) the
Assumption Fee; (ii) the Consent Fee; (iii) the legal fees and disbursements of
Lender's counsel, Bilzin Sumberg Dunn Price & Axelrod LLP, in connection with
the preparation of this Agreement and the transactions contemplated in this
Agreement; (iv) all recording costs and documentary stamps, if any, due upon the
recording of this Agreement; and (v) the costs of updating Lender's policy of
title insuring the Deed of Trust to a current date and endorsing such policy to
include this Agreement in the description of the Deed of Trust with no
additional exceptions, or, at Lender's option, the cost of obtaining a new loan
title policy acceptable to Lender insuring the Deed of Trust as affected by this
Agreement.
3
-
ADDITIONAL PROVISIONS
---------------------
3.1 CONSENT OF LENDER. Subject to the terms of this Agreement, Lender
-----------------
hereby consents to the Requested Actions. Borrower Parties agree that this
Agreement shall not be deemed an agreement by Lender to consent to any other
transfer or conveyance of the Project or assumption of the Loan, or any other
actions of New Borrower requiring Lender's consent under the terms of the Loan
Documents.
3.2 NOTICES OF DEFAULT. Lender agrees to give Tenant a copy of any
------------------
notice of any default given to New Borrower under the Loan Documents and shall
give Tenant the opportunity to cure such default within the applicable cure
period, if any, set forth in the Loan Documents. Lender's agreement to give
Tenant notice and the opportunity to cure any event of default under the Loan
Documents should in no manner be deemed to create or extend any cure periods set
forth in the Loan Documents.
3.3 EQUITY LOANS. In the event of a default under any of the Equity Loan
------------
Documents, the remedy for which entitles Healthcare Realty or an affiliate of
Healthcare Realty (a "Healthcare Realty Affiliate") to acquire the Project or
---------------------------
the Pledged Interests and the Pledged Stock or if for any other reason
Healthcare Realty or a Healthcare Realty Affiliate acquires the Pledged
Interests and/or Pledged Stock or the Project, provided the Loan is not in
default, Lender shall consent to the transfer of the Project or of the Pledged
Interests and the Pledged Stock to Healthcare Realty or a Healthcare Realty
Affiliate provided the following terms and conditions are satisfied:
-14-
<PAGE>
(a) New Hazardous Substances Indemnity. Healthcare Realty shall have
----------------------------------
executed and delivered to Lender a Hazardous Substances Indemnity Agreement in
the form attached hereto as EXHIBIT "C";
(b) New Indemnity and Guaranty. Healthcare Realty shall have executed
--------------------------
and delivered to Lender an Indemnity and Guaranty Agreement in the form attached
hereto as EXHIBIT "D";
(c) Assumption Agreement. In the event a Healthcare Realty Affiliate
--------------------
desires to acquire the Project, it shall have executed an assumption or similar
agreement in substantially the same form as this Agreement assuming all
obligations of New Borrower under the Loan Documents;
(d) Financial Condition. There shall not have been a material adverse
-------------------
change to Healthcare Realty's financial condition between the dates of the
Financial Statements delivered to Lender pursuant to Section 1.2(d) hereof and
the date Healthcare Realty or a Healthcare Realty Affiliate acquires the Pledged
Interests and the Pledged Stock or the Project;
(e) Bankruptcy Remote Entity. If a Healthcare Realty Affiliate
------------------------
desires to acquire the Project from New Borrower rather than the Pledged
Interests and the Pledged Stock, the Healthcare Realty Affiliate shall be a
single purpose, bankruptcy remote entity reasonably acceptable to Lender and
meeting at least the same bankruptcy remote entity requirements of New Borrower
and any reasonable additional bankruptcy remote entity requirements required by
Lender at the time of transfer of the Project (a "Bankruptcy Remote Entity").
------------------------
In addition, the Healthcare Realty Affiliate acquiring the Project shall have
provided to Lender non-consolidation, authority and enforceability opinions
issued by counsel reasonably acceptable to Lender containing substantially the
same opinions contained in the non-consolidation, authority and enforceability
opinions delivered to Lender in connection with the assumption of the Loan by
New Borrower as contemplated hereby;
(f) Assignment or Transfer Documents. Healthcare Realty or the
---------------------------------
Healthcare Realty Affiliate shall have delivered to Lender copies of all
assignment or conveyance documents executed in connection with the transfer of
the Pledged Interests and Pledged Stock from SELCO or the Project from New
Borrower to Healthcare Realty or the Healthcare Realty Affiliate;
(g) Title. Healthcare Realty or the Healthcare Realty Affiliate shall
------
also have delivered to Lender such endorsements to its loan title policy as
Lender may reasonably request reflecting the change of ownership of the Project
and updating the effective date thereof to the date of the transfer of the
Project, if applicable, or affirmatively insuring Lender that the transfer of
the Pledged Interests and/or the Pledged Stock to Healthcare Realty or the
Healthcare Realty Affiliate will not affect the validity, enforceability or
priority of Lender's lien on the Project; and
(h) Fees and Costs. Lender shall have been paid a non-refundable
--------------
transfer fee in an amount equal to all out-of-pocket costs and expenses,
including without limitation, attorney's fees and costs (which fees and costs
shall be payable whether or not the transfer of the Pledged
-15-
<PAGE>
Interest and/or the Pledged Stock is consummated) incurred by Lender in
connection with such transfer.
3.4 TRANSFER OF PLEDGED INTERESTS AND PLEDGED STOCK TO TENANT. Upon the
---------------------------------------------------------
the occurrence of any event under the Lease in which Tenant or an affiliate of
Tenant or Tenant's Parent (a "Tenant Affiliate") is required or entitled and
----------------
desires to acquire the Project or the Pledged Interests and the Pledged Stock,
notwithstanding anything to the contrary in the Loan Documents, Lender shall
consent to such transfer of the Project or the Pledged Interests and the Pledged
Stock provided the following terms and conditions are satisfied:
(a) Financial Condition. There shall not have been a material adverse
-------------------
change to the Tenant's Parent financial condition between the dates of the
Parent Financial Statements delivered to Lender pursuant to Section 1.4(g)
hereof and the date Tenant or a Tenant Affiliate acquires the Pledged Interests
and the Pledged Stock or the date a Tenant Affiliate acquires the Project;
(b) Assumption Agreement. In the event Tenant or a Tenant Affiliate
--------------------
acquires the Project, Tenant or a Tenant Affiliate shall have executed an
assumption or similar agreement in substantially the same form as this Agreement
assuming all obligations of New Borrower under the Loan Documents;
(c) Bankruptcy Remote Entity. In the event that Tenant or a Tenant
------------------------
Affiliate desires to acquire the Project from New Borrower, Tenant or a Tenant
Affiliate shall be a Bankruptcy Remote Entity and shall cause to be delivered to
Lender the legal opinions described in Section 3.3(e) hereof;
(d) Assignment or Transfer Documents. Tenant or the Tenant Affiliate
--------------------------------
shall have delivered to Lender copies of all assignment or conveyance documents
executed in connection with the transfer of the Pledged Interests and Pledged
Stock from SELCO or the Project from New Borrower to Tenant or the Tenant
Affiliate;
(e) Title. Tenant or the Tenant Affiliate shall have also delivered
-----
to Lender such endorsements to its loan title policy as Lender may reasonably
request reflecting the change of ownership of the Project and updating the
effective date thereof to the date of the transfer of the Project, if
applicable, or affirmatively insuring Lender that the transfer of the Pledged
Interests and/or the Pledged Stock to Tenant or the Tenant Affiliate will not
affect the validity, enforceability or priority of Lender's lien on the Project;
and
(f) Fees and Costs. Tenant shall have paid Lender a non-refundable
--------------
transfer fee in an amount equal to all out-of-pocket costs and expenses,
including without limitation, reasonable attorney's fees and costs (which fees
and costs shall be payable whether or not the transfer of the Project or the
Pledged Interests and the Pledged Stock to Tenant is consummated) incurred by
Lender in connection with such transfer to Tenant.
-16-
<PAGE>
3.5 DEFINITION OF AFFILIATE. For purposes of Sections 3.3 and 3.4 of
-----------------------
this Agreement, the term "Affiliate" shall mean an entity wholly owned by
Healthcare Realty, Tenant or Tenant's Parent, as applicable.
3.6 MODIFICATIONS TO LOAN DOCUMENTS. Section 1.33(d) of the Deed of
-------------------------------
Trust is hereby modified to delete subparagraph (iii) thereof and Section 2.1(b)
of the Deed of Trust is hereby amended to correct the reference from Section
"1.15" to Section "1.13".
3.7 SCRIVENOR'S ERROR IN LEGAL DESCRIPTION. The parties acknowledge
--------------------------------------
that the legal description attached to the Deed of Trust and all of the other
Loan Documents contains a scrivenor's error. Therefore, Original Borrower, New
Borrower and Lender hereby agree that the legal description attached hereto as
EXHIBIT "A" is the correct legal description that should have been attached to
the Deed of Trust and all of the other Loan Documents, and hereby modify the
Deed of Trust and all of the other Loan Documents to substitute the legal
description attached hereto as EXHIBIT "A" for the incorrect legal descriptions
attached as the legal description exhibits to the Deed of Trust and all of the
other Loan Documents. All references to the term "Land", "Property", "Real
Estate", "Exhibit A" or any of the other legal description exhibits in the Deed
of Trust or any of the other Loan Documents shall hereinafter mean and refer to
the real property described in EXHIBIT "A" attached hereto and incorporated
herein.
3.8 ADDITIONAL DOCUMENTS. Contemporaneously with the execution and
--------------------
delivery of this Agreement and as a material inducement to Lender to enter into
this Agreement, (a) New Borrower and Tenant shall have executed and delivered to
Lender UCC-2 Statements of Change amending the Financing Statements for
recording in the Records and in the Secretary of State of California to, among
other things, add New Borrower and Tenant as additional debtors; (b) Tenant
shall have executed and delivered to Lender a Collateral Assignment and Security
Agreement in Respect of Contracts, Licenses and Permits in a form reasonably
satisfactory to Lender and UCC Financing Statements related thereto; (c) Tenant
and Tenant's Parent shall have executed and delivered to Lender an Indemnity and
Guaranty Agreement (the "New Indemnity and Guaranty Agreement"; (d) New
------------------------------------
Borrower, Tenant and Tenant's Parent shall have executed and delivered to Lender
a Hazardous Substances Indemnity Agreement (the "New Hazardous Substances
------------------------
Indemnity"); (e) Tenant shall have executed and delivered to Lender a UCC
- ---------
Financing Statement with respect to all of Tenant's right, title and interest
in, to and under any Leases or Rents (as such terms are defined in the
Assignment of Rents); (f) Tenant shall have executed and delivered to Lender a
Certificate of Independent Director and a Certificate Regarding Standard Lease;
(g) New Borrower shall have caused each of the Indemnified Parties (as such term
is defined in the Lease) to execute and deliver to Lender an Indemnity Priority
Agreement regarding the relationship and priorities between the indemnities
required by the Lease and the New Hazardous Substances Indemnity Agreement and
the New Indemnity and Guaranty Agreement; (h) H. James Griggs and Jeffrey A.
Hallsten shall have executed and delivered to Lender a Reaffirmation of
Indemnity and Guaranty and Consent of Indemnitors; and (i) Original Borrower and
H. James Griggs and Jeffrey A. Hallsten shall have
-17-
<PAGE>
executed and delivered to Lender a Reaffirmation of Hazardous Substances
Indemnity Agreement and Consent of Indemnitors.
3.9 ALIENATION AND FURTHER ENCUMBRANCES. For purposes of Section
-----------------------------------
1.13 of the Deed of Trust, (a) the transfer, pledge or assignment of Tenant's
interest in the Lease, (b) the transfer of the Pledged Interests or the Pledged
Stock to any person or entity other than Healthcare Realty, a Healthcare Realty
Affiliate, Tenant or a Tenant Affiliate, (c) the transfer of the Project to any
person or entity other than a Bankruptcy Remote Entity wholly owned by Tenant,
Tenant's Parent or Healthcare Realty pursuant to the terms of Sections 3.3 and
3.4 hereof, or (d) the transfer by New Borrower of its interest in the Leasehold
Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the
"Leasehold Deed of Trust") dated as of the date hereof given by Tenant, as
-----------------------
Trustor in favor of New Borrower, as Beneficiary shall all be deemed a transfer
of an interest in or of the Project which shall be prohibited without Lender's
consent as provided in said Section 1.13. Notwithstanding the foregoing, Tenant
may transfer the Tenant's interest in the Lease to a Tenant Affiliate provided
such Tenant Affiliate is a Bankruptcy Remote Entity and assumes Tenant's
obligations under the Lease and this Agreement and executes any and all
documents reasonably requested by Lender to effectuate such assumption.
3.10 DEFINED TERMS IN LOAN DOCUMENTS. New Borrower agrees that from
-------------------------------
and after the date hereof, that the term "Rents and Profits" as used in the Deed
of Trust and the term "Leases" as used in the Assignment of Rents shall include,
but not be limited to, the Lease and that the term "Rents" as used in the
Assignment of Rents shall include, but not be limited to, all components of
Basic Rental, Additional Rental, the End of Term Adjustment, the Purchase Price,
the Termination Value, Equity Rental or Equity Rent (as either of such terms
are defined in the Lease) and any other amounts which are payable by Tenant
under the Lease. In addition, all references to the term "Loan Documents" in
the Deed of Trust and the Assignment of Rents shall hereinafter mean and refer
to (i) all of the Loan Documents described therein; (ii) this Agreement; and
(iii) any and all other documents executed in connection with this Agreement.
New Borrower agrees that the term Property, as used in the Deed of
Trust, includes all of New Borrower's right, title and interest in, to and under
the Assigned Contracts and Permits, as such term is defined in that certain
Collateral Assignment and Security Agreement in Respect of Contracts, Licenses
and Permits (the "Collateral Assignment") dated as the date hereof given by
---------------------
Tenant in favor of New Borrower.
3.11 OBLIGATIONS UNDER LOAN DOCUMENTS. New Borrower and Tenant
--------------------------------
acknowledge and agree that Tenant's agreement to perform on New Borrower's
behalf, New Borrower's obligations under the Loan Documents, shall not relieve
New Borrower from any liability to perform such obligations, and Tenant's or New
Borrower's failure to timely and fully perform such obligations shall constitute
a default under the Loan Documents.
3.12 SECURITY AGREEMENT FROM TENANT AS TO PROPERTY IN DEED OF TRUST.
--------------------------------------------------------------
As a material inducement to Lender to consent to the New Borrower entering into
the Lease with Tenant, Tenant
-18-
<PAGE>
hereby irrevocably grants, transfers, conveys and assigns to Lender IN TRUST
WITH POWER OF SALE, for the benefit and security of Lender, as Beneficiary
thereunder, under and subject to the terms and conditions set forth in the Deed
of Trust all of Tenant's right, title and interest in, to and under any of the
"Property" described in Deed of Trust, including the Assigned Contracts and
Permits, as such term is defined in the Collateral Assignment. In order to
perfect Lender's security interest in and to such "Property," including any
replacements or proceeds thereof, Tenant is simultaneously herewith executing
and delivering to Lender UCC-2 Financing Statements of Change amending the
existing Financing Statements to add Tenant as additional debtor and to add the
Assigned Contracts and Permits to the description of the collateral.
3.13 CONSENT OF TENANT TO MODIFICATION OF LOAN DOCUMENTS So long as
---------------------------------------------------
the Lease has not been terminated and there is no event of default thereunder,
Lender and New Borrower agree that they will not amend or modify any of the Loan
Documents without first obtaining Tenant's prior written consent.
3.14 FINANCIAL STATEMENTS. Notwithstanding New Borrower's obligation
--------------------
to deliver audited financial statements as set forth in Section 1.18(d) of the
Deed of Trust, so long as the Lease remains in effect, New Borrower shall not be
required to provide such audited financial statements provided that Tenant
provides such audited financial statements on itself and further delivers all
other financial statements required by and otherwise complies with the terms of
Section 1.18 of the Deed of Trust.
In addition to the financial statements required under Section
1.18 of the Deed of Trust, on an annual basis, New Borrower shall cause SELCO
and Healthcare Realty, and Tenant shall cause Tenant's Parent to deliver to
Lender an annual report and the same type of financial statements for the then
current year that were delivered to Lender in connection with this Agreement.
3.15 LENDER'S CONSENT TO REQUESTED ACTIONS. Lender's consent to the
-------------------------------------
Requested Actions should in no manner be deemed to (a) waive any rights Lender
has to consent to any matters in the Lease or in any of the Equity Loan
Documents that require its consent under the Loan Documents unless Lender has
specifically given its consent to any such matters in this Agreement, or (b)
change the standards of Lender's consent as set forth in the Loan Documents or
(c) waive or modify any of other covenants, conditions, terms, or provision of
the Loan Documents unless such modification is specifically set forth herein.
3.16 LEASEHOLD DEED OF TRUST. Tenant and New Borrower agree not to
-----------------------
amend or modify the Leasehold Deed of Trust without first obtaining the prior
written consent of Senior Lender.
-19-
<PAGE>
4
-
MISCELLANEOUS PROVISIONS
------------------------
4.1 NO LIMITATION OF REMEDIES. No right, power or remedy conferred
-------------------------
upon or reserved to or by Lender in this Agreement is intended to be exclusive
of any other right, power or remedy conferred upon or reserved to or by Lender
under this Agreement, the Loan Documents or at law, but each and every remedy
shall be cumulative and concurrent, and shall be in addition to each and every
other right, power and remedy given under this Agreement, the Loan Documents or
now or subsequently existing at law.
4.2 NO WAIVERS. Except as otherwise expressly set forth in this
----------
Agreement, nothing contained in this Agreement shall constitute a waiver of any
rights or remedies of Lender under the Loan Documents or at law. No delay or
failure on the part of any party hereto in the exercise of any right or remedy
under this Agreement shall operate as a waiver, and no single or partial
exercise of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy. No action or forbearance by any
party hereto contrary to the provisions of this Agreement shall be construed to
constitute a waiver of any of the express provisions. Any party hereto may in
writing expressly waive any of such party's rights under this Agreement without
invalidating this Agreement.
4.3 SUCCESSORS OR ASSIGNS. Whenever any party is named or referred
---------------------
to in this Agreement, the heirs, executors, legal representatives, successors,
successors-in-title and assigns of such party shall be included. All covenants
and agreements in this Agreement shall bind and inure to the benefit of the
heirs, executors, legal representatives, successors, successors-in-title and
assigns of the parties, whether so expressed or not.
4.4 CONSTRUCTION OF AGREEMENT. Each party hereto acknowledges that
-------------------------
it has participated in the negotiation of this Agreement and no provision shall
be construed against or interpreted to the disadvantage of any party hereto by
any court or other governmental or judicial authority by reason of such party
having or being deemed to have structured, dictated or drafted such provision.
Borrower Parties at all times have had access to an attorney in the negotiation
of the terms of and in the preparation and execution of this Agreement.
Borrower Parties have had the opportunity to review and analyze this Agreement
for a sufficient period of time prior to execution and delivery. No
representations or warranties have been made by or on behalf of Lender, or
relied upon by Borrower Parties, pertaining to the subject matter of this
Agreement, other than those set forth in this Agreement. All prior statements,
representations and warranties, if any, are totally superseded and merged into
this Agreement, which represent the final and sole agreement of the parties with
respect to the subject matters. All of the terms of this Agreement were
negotiated at arm's length, and this Agreement was prepared and executed without
fraud, duress, undue influence or coercion of any kind exerted by any of the
parties upon the others. The execution and delivery of this Agreement is the
free and voluntary act of Borrower Parties.
-20-
<PAGE>
4.5 INVALID PROVISION TO AFFECT NO OTHERS. If, from any
-------------------------------------
circumstances whatsoever, fulfillment of any provision of this Agreement or any
related transaction at the time performance of such provision shall be due,
shall involve transcending the limit of validity presently prescribed by any
applicable usury statute or any other applicable law, with regard to obligations
of like character and amount, then ipso facto, the obligation to be fulfilled
---- -----
shall be reduced to the limit of such validity. If any clause or provision
operates or would prospectively operate to invalidate this Agreement, in whole
or in part, then such clause or provision only shall be deemed deleted, as
though not contained, and the remainder of this Agreement shall remain operative
and in full force and effect.
4.6 NOTICES. Except as otherwise specifically provided to the
-------
contrary, any and all notices, elections, approvals, consents, demands, requests
and responses ("Communications") permitted or required to be given under this
--------------
Agreement and the Loan Documents shall not be effective unless in writing,
signed by or on behalf of the party giving the same, and sent by certified or
registered mail, postage prepaid, return receipt requested, or by hand delivery
or overnight courier service (such as Federal Express), to the party to be
notified at the address of such party set forth below or at such other address
within the continental United States as such other party may designate by notice
specifically designated as a notice of change of address and given in accordance
with this Section. Any Communications shall be effective upon the earlier of
their receipt or three days after mailing in the manner indicated in this
Section. Receipt of Communications shall occur upon actual delivery but if
attempted delivery is refused or rejected, the date of refusal or rejection
shall be deemed the date of receipt. Any Communication, if given to Lender,
must be addressed as follows, subject to change as provided above:
LaSalle National Bank, as Trustee
c/o Mellon Mortgage Company
1422 Euclid Avenue, Suite 900
Cleveland, OH 44115-2092
Attn: Mary Ann Forbes and Pep Llinas
Loan Number: DLJ1996-CF1; 9690381
With a copy to:
Bilzin Sumberg Dunn Price & Axelrod LLP
2500 First Union Financial Center
Miami, Florida 33131-2336
Attn: Audrey A. Ellis, Esq.
and, if given to Original Borrower, must be addressed as follows,
notwithstanding any other address set forth in the Loan Documents to the
contrary, subject to change as provided above:
-21-
<PAGE>
Atrium Venture
c/o The Atrium at San Jose
4121-A Power Inn Road
Sacramento, California 95826
Attn: Jeffrey A. Hallsten
With a copy to:
Calfee & Young
611 North Street
Woodland, California 95695-3237
Attn: Christopher J. Konwinski, Esq.
and, if given to New Borrower, must be addressed as follows, subject to change
as provided above:
The Atrium of San Jose LLC
c/o SELCO Service Corporation
Keycorp. Leasing
54 State Street
Albany, New York 12207
Telephone No.:________________
Facsimile No.:_________________
and
With a copy to:
Tenant at the address set forth below
and if given to Tenant, must be addressed as follows, subject to change as
provided above:
Brookdale Living Communities of California, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Robert J. Rudnik
Telephone No.: (312) 977-3760
Facsimile No.: (312) 977-3669
-22-
<PAGE>
With a copy to:
Burke, Warren, MacKay & Serritella, P.C.
330 N. Wabash Avenue, 22nd Floor
Chicago, Illinois 60601
Attn: Douglas E. Wambach, Esq.
4.7 GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California.
4.8 HEADINGS; EXHIBITS. The headings of the articles, sections and
------------------
subsections of this Agreement are for the convenience of reference only, are not
to be considered a part of this Agreement and shall not be used to construe,
limit or otherwise affect this Agreement.
4.9 MODIFICATIONS. The terms of this Agreement may not be changed,
-------------
modified, waived, discharged or terminated orally, but only by an instrument or
instruments in writing, signed by the Party against whom the enforcement of the
change, modification, waiver, discharge or termination is asserted.
4.10 TIME OF ESSENCE; CONSENTS. Time is of the essence of this
-------------------------
Agreement and the Loan Documents. Any provisions for consents or approvals in
this Agreement shall mean that such consents or approvals shall not be effective
unless in writing and executed by Lender.
4.11 NONRECOURSE. Any provision of this Agreement or the Loan
-----------
Documents to the contrary notwithstanding, the liability of New Borrower
hereunder, if any, shall be satisfied solely from the assets of New Borrower,
including the Project, but not from New Borrower's rights to the CDs or the CD
Pledge Agreement and any other collateral pledged thereunder. No recourse under
or upon any representation, warranty, obligation covenant or agreement contained
herein or for any claim based herein or in respect hereto shall be had against
any past, present or future member, manager, stockholder, director, officer,
employee, attorney, administrator, trustee or agent, as such, of New Borrower or
the Managing Member of New Borrower or any of their respective assets or
properties unless such claim is based on the fraud, gross negligence or willful
misconduct of such party.
Furthermore, Lender acknowledges and agrees that it shall have no
right, interest (including security interest or lien) or claim to the CDs or New
Borrower's rights under the CD Pledge Agreement, it being understood that KCCI
and SELCO have each relied upon the pledge to KCCI and SELCO of the CDs by
Tenant and New Borrower and the other collateral pledged under the CD Pledge
Agreement in KCCI making a loan to SELCO and SELCO using the proceeds of such
loan, plus additional equity money provided by SELCO in making an equity
contribution to New Borrower.
-23-
<PAGE>
4.12 COUNTERPARTS. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, and all such
counterparts together shall constitute one and the same instrument.
4.13 JURISDICTION; WAIVER OF TRIAL BY JURY. TENANT AND BORROWER
-------------------------------------
PARTIES, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY
AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (i) SUBMIT TO
PERSONAL JURISDICTION IN THE STATE OF CALIFORNIA OVER ANY SUIT, ACTION OR
PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THE NOTE, THIS DEED OF
TRUST OR ANY OTHER OF THE LOAN DOCUMENTS, (ii) AGREE THAT ANY SUCH ACTION, SUIT
OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION SITTING IN SANTA CLARA COUNTY, CALIFORNIA, (iii) SUBMITS TO THE
JURISDICTION OF SUCH COURTS, AND, (iv) TO THE FULLEST EXTENT PERMITTED BY LAW,
AGREE THAT IT WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM
(BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION, SUIT
OR PROCEEDING IN ANY OTHER FORUM). BORROWER PARTIES AND TENANT FURTHER CONSENT
AND AGREE TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY
SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE
PREPAID, TO THE BORROWER PARTIES OR TENANT AT THE ADDRESSES FOR NOTICES
DESCRIBED IN SECTION 4.6 HEREOF, AND CONSENT AND AGREE THAT SUCH SERVICE SHALL
CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN
SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER
PERMITTED BY LAW).
(b) LENDER, TENANT AND BORROWER PARTIES, TO THE FULL EXTENT
PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON
THE ADVICE OF COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER FOREGO THE RIGHT
TO A TRAIL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO THE INDEBTEDNESS SECURED BY THE LOAN DOCUMENTS OR ANY
CONDUCT, ACT OR OMISSION OF LENDER, BORROWER PARTIES, OR TENANT OR ANY OF THEIR
DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY
OTHER PERSONS AFFILIATED WITH LENDER, BORROWER PARTIES, OR TENANT IN EACH OR THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
-24-
<PAGE>
The parties have executed and delivered this Agreement as of the day and
year first above written.
Signed, sealed and delivered LENDER:
------
in the presence of:
LASALLE NATIONAL BANK, AS
TRUSTEE FOR THE REGISTERED
______________________________ HOLDERS OF DLJ MORTGAGE
Print witness name:___________ ACCEPTANCE CORP., COMMERCIAL
MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1996-CF1
By: Lennar Partners, Inc.,
as attorney-in-fact
Sign:_________________________ By:___________________(SEAL)
Print witness name:_____________ Name: _____________________
Title: Vice President
STATE OF FLORIDA )
) SS.:
COUNTY OF MIAMI-DADE )
The foregoing instrument was acknowledged before me this ___ day of
________, 1998, by _________________, as Vice President of Lennar Partners,
Inc., a Florida corporation, on behalf of said corporation as attorney-in-fact
for LASALLE NATIONAL BANK, AS TRUSTEE FOR THE REGISTERED HOLDERS OF DLJ MORTGAGE
ACCEPTANCE CORP., COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1996-
CF1. He is personally known to me or has produced a __________ driver's license
as identification.
Sign Name:_____________________________
Print Name:_____________________________
My Commission Expires: NOTARY PUBLIC
Serial No. (none, if blank): ______________
-25-
<PAGE>
ORIGINAL BORROWER:
-----------------
Signed, sealed and delivered ATRIUM VENTURE, a California limited
in the presence of: partnership
____________________________ By: Congregate Communities Corporation,
Print Name:_________________ a California corporation, its General
Partner
Sign:_______________________ By: __________________________(SEAL)
Print Name: _________________ Name:______________________________
Title:_____________________________
STATE OF CALIFORNIA )
) SS.:
COUNTY OF ________ )
On ____________, 1998, before me, the undersigned, a Notary Public in
and for said State, personally appeared ____________ known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument,
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
________________________________________________
Notary Public in and for the State of California
-26-
<PAGE>
NEW BORROWER:
------------
Signed, sealed and delivered THE ATRIUM OF SAN JOSE LLC,
in the presence of: a Delaware limited liability company,
Sign:_______________________ By: The Atrium of San Jose, Inc.,
Print Name:_________________ a Delaware corporation, its Managing
Member
By:__________________________
Name:_______________________ Sign:________________________
Title:______________________ Print Name: _________________
STATE OF _________ )
) SS.:
COUNTY OF ________ )
On _________, 1998, before me, the undersigned, a Notary Public in and for
said State, personally appeared _______________________ known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument,
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
_______________________________________________
Notary Public in and for the State of California
-27-
<PAGE>
TENANT:
------
Signed, sealed and delivered BROOKDALE LIVING COMMUNITIES OF
in the presence of: CALIFORNIA, INC., a Delaware corporation
Sign:_______________________
Print Name:__________________
By:______________________________
Sign:_______________________ Name:____________________________
Print Name: _________________ Title:___________________________
STATE OF ILLINOIS )
) SS.:
COUNTY OF COOK )
On _________, 1998, before me, the undersigned, a Notary Public in and for
said State, personally appeared _______________________ known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument,
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
______________________________________________
Notary Public in and for the State of Illinois
-28-
<PAGE>
EXHIBIT "A"
-----------
LEGAL DESCRIPTION
-----------------
-29-
<PAGE>
EXHIBIT "B"
RENT ROLL
THIS PAGE LEFT INTENTIONALLY BLANK FOR RECORDING PURPOSES.
-30-
<PAGE>
EXHIBIT "C"
HEALTHCARE REALTY HAZARDOUS SUBSTANCES INDEMNITY
-31-
<PAGE>
EXHIBIT "D"
HEALTHCARE REALTY INDEMNITY AND GUARANTY AGREEMENT
-32-
<PAGE>
JOINDER BY HEALTHCARE REALTY,
TENANT'S PARENT AND MANAGING MEMBER
The undersigned, Healthcare Realty Trust Incorporated, a Maryland
corporation (the "Healthcare Realty"), Brookdale Living Communities, Inc., a
-----------------
Delaware corporation ("Tenant's Parent"), and The Atrium of San Jose, Inc., a
---------------
Delaware corporation ("Managing Member") hereby join in the foregoing Note and
---------------
Deed of Trust Assumption Agreement as of the date thereof (the "Assumption
----------
Agreement") for the sole purpose of confirming, as applicable (i) the truth and
- ---------
correctness of the representations made to Lender in Section 1.2(d) (as to
Healthcare Realty only); Section 1.4(d) (as to Tenant's Parent); and Sections
1.2(b) and 1.2(c) (as to Managing Member).
In addition, Healthcare Realty agrees to give Lender notice of any
defaults under any of the Equity Loan Documents to which it is a party that, if
not cured, may result in a transfer of the Pledged Interests or the Pledged
Stock to Healthcare Realty, Tenant or otherwise.
HEALTHCARE REALTY TRUST
By:__________________________
Name:________________________
Title:_______________________
STATE OF ________________ )
) SS.:
COUNTY OF _______________ )
On _________, 1998, before me, the undersigned, a Notary Public in and for
said State, personally appeared _______________________ known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument,
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
______________________________________
Notary Public in and for the State of
[SIGNATURES CONTINUED ON NEXT PAGE]
-33-
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC,
a Delaware corporation
By:_______________________________
Name:_____________________________
Title:____________________________
STATE OF ___________ )
) SS.:
COUNTY OF __________ )
On _________, 1998, before me, the undersigned, a Notary Public in and for
said State, personally appeared _______________________ known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument,
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
______________________________________________
Notary Public in and for the State of Illinois
[SIGNATURES CONTINUED ON NEXT PAGE]
-34-
<PAGE>
THE ATRIUM OF SAN JOSE, INC.
a Delaware corporation
By:____________________________
Name:__________________________
Title:_________________________
STATE OF ___________ )
) SS.:
COUNTY OF __________ )
On _________, 1998, before me, the undersigned, a Notary Public in and for
said State, personally appeared _______________________ known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument,
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
______________________________________
Notary Public in and for the State of
-35-
<PAGE>
EXHIBIT 10.3
- ----------------------------------
WHEN RECORDED RETURN TO:
Harry J. Hutton, Esquire
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02111
SPACE ABOVE THIS LINE FOR RECORDER'S USE
- --------------------------------------------------------------------------------
LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS,
---------------------------------------------
SECURITY AGREEMENT AND FIXTURE FILING
-------------------------------------
1009 BLOSSOM RIVER WAY
SAN JOSE, CALIFORNIA 95123
THIS DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE
FILING (this "Leasehold Deed of Trust"), is made as of this ___ day of May,
-----------------------
1998, by BROOKDALE LIVING COMMUNITIES OF CALIFORNIA, INC., a Delaware
corporation, with an address at c/o Brookdale Living Communities, Inc., 77 West
Wacker Drive, Suite 4400, Chicago, Illinois 60601 ("Trustor"), to First
-------
American Title Insurance Company, having its principal place of business at 1860
Howe Avenue, Suite 120, Sacremento, California 95825 ("Trustee"), for the
-------
benefit of THE ATRIUM OF SAN JOSE LLC, a Delaware limited liability company,
with an address at c/o Wilmington Trust Company, as Administrator, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890 Attn: Corporate
Trust Administration ("Beneficiary").
-----------
WHEREAS, Beneficiary has leased to Trustor certain real property in the
City of San Jose, County of Santa Clara, California, more particularly described
in Exhibit A, attached hereto and incorporated by reference herein (the "Leased
--------- ------
Property"), pursuant to a Lease Agreement dated as of May 11, 1998, a memorandum
- --------
of which was recorded concurrently herewith as Instrument No. ____________ in
the Official Records of Santa Clara County, California (together, the "Lease");
-----
WHEREAS, it is the intent of the parties hereto that: (i) the Lease
constitutes an "operating lease" pursuant to Statement of Financial Accounting
Standards No. 13, as amended, for purposes of Trustor's financial reporting, and
(ii) for purposes of Federal and state income tax, real estate, bankruptcy and
UCC purposes, the transaction contemplated hereby and the Lease is a financing
arrangement and preserves ownership of the leasehold estate in the Leased
Property in the Trustor; and
WHEREAS, Beneficiary has required as a condition precedent to (i) advancing
Beneficiary's funds for the acquisition of fee title to the Leased Property, and
(ii) entering into the Lease of the Leased Property with Trustor, that payment
and performance of Trustor's obligations under the Lease be secured by all
Trustor's right, title and interest in the Leased Property, including, without
limitation, Trustor's leasehold interest therein.
<PAGE>
ARTICLE I
---------
GRANT IN TRUST
NOW, THEREFORE, in consideration of the Lease by Beneficiary and (i)
to secure the payment of the "Obligations", which is herein defined as all
-----------
obligations, indebtedness and liabilities of Trustor to Beneficiary under the
Lease and the Lease Documents (as hereinafter defined) including, without
limitation, the Base Rental, Additional Rental, impositions, real property taxes
and assessments, late charges, insurance premiums, indemnification obligations,
amounts and all other debts and obligations, direct or indirect, absolute or
contingent, joint and/or several, liquidated or not liquidated, due or to become
due, arising under or evidenced by any or all of the "Lease Documents" (which
---------------
term is herein defined to mean, collectively, the Lease, this Leasehold Deed of
Trust, the Collateral Assignment and Security Agreement in respect of Contracts,
Licenses and Permits, the Pledge and Security Agreement (Cash, Cash Equivalents
and Investment Property), and all extensions, renewals, modifications,
substitutions and replacements thereof), and all attorneys' fees and other
expenses incurred in the enforcement or collection of the Obligations,
indebtedness and liabilities described above; and (ii) to secure the performance
by Trustor of all other obligations and covenants of Trustor contained in the
Lease Documents, Trustor hereby irrevocably grants, conveys, transfers and
assigns to the Trustee, its successors and assigns, in trust for the benefit of
Beneficiary, with power of sale and right of entry and possession, all of the
Trustor's right, title and interest in and to the following described property
and rights (collectively called the "Encumbered Property"):
-------------------
(a) The leasehold estate of the Trustor pursuant to the Lease, as the same
may be amended, restated, or otherwise modified from time to time,
together with any and all additional estates and interests hereafter
acquired or held by the Trustor in the Leased Property, or any portion
thereof, including without limitation a fee simple interest in the
Leased Property, or any portion thereof, and all tenements,
hereditaments, appurtenances, privileges, rights, benefits, and
options, including without limitation, options to purchase or lease
all or any part of the Leased Property or any interest therein (and
any greater estate in the Leased Property now owned or hereafter
acquired pursuant thereto), and other rights and interests now or in
the future benefiting or otherwise relating to the Leased Property,
including easements, rights-of-way, sidewalks, alleys and strips and
gores of land adjacent to or used in connection with the Leased
Property, development rights, mineral rights, water rights and water
stock, all claims or demands whatsoever of Trustor therein or thereto,
either at law or in equity, and all estate, right, title and interest
of Trustor in and to all streets, roads and public places, opened or
proposed, now or hereafter used in connection with, existing,
belonging or appertaining to the Leased Property (hereinafter
collectively referred to as the "Land");
----
(b) All buildings, structures and other improvements now or hereafter
existing, erected or placed on the Land, or in any way used in
connection with the use, enjoyment, occupancy or operation of the Land
or any portion thereof; and all fixtures of every kind and nature
whatsoever now or hereafter owned by Trustor and used or produced for
use in connection with the Leased Property, and any additions and
alterations thereto or replacements thereof (together with the Land
hereinafter referred to collectively as the "Real Property");
-------------
(c) All fixtures and personal property of any kind or nature whatsoever,
whether tangible or intangible, which are used or will be used in
connection with the construction, management, use, occupancy,
enjoyment, maintenance and operation of the Leased Property,
including, without limitation, all plans and specifications, contracts
and subcontracts for the construction, reconstruction or repair of the
Leased Property, and copies of related product development
-2-
<PAGE>
records and copies of regulatory affairs, communications, including
inspection reports, and those of the assets listed above as part of
the Real Property but which may be considered also Personal Property,
all contracts now or hereafter existing between Trustor and any
contractor, bonds, including, but not limited to, completion bonds,
performance bonds and labor and material payment bonds relating to the
construction, reconstruction or repair of the Leased Property, all
agreements now or hereafter entered into with any person or entity in
respect of architectural, engineering, design or consulting services
rendered or to be rendered in connection with planning, design,
inspection or supervision of construction, reconstruction or repair of
the Leased Property, contract rights, accounts, accounts receivable,
general intangibles, instruments, documents, machinery and equipment,
permits, licenses, contracts, franchises, guarantees, warranties,
causes of action, judgments, claims, profits, rents, security
deposits, utility deposits, refunds of fees, insurance premiums or
deposits paid to any governmental authority, letters of credit,
insurance policies and proceeds thereof, together with all present and
future attachments, accretions, accessions, replacements,
substitutions and additions thereto and products and cash and non-cash
proceeds thereof (hereinafter collectively referred to as "Personal
--------
Property");
--------
(d) All wastewater, fresh water and other utilities capacity and
facilities (the "Utilities Capacity") available or allocable to the
------------------
Land and the buildings and improvements thereon, or dedicated to or
reserved for them pursuant to any system, program, contract or other
arrangement with any public or private utility, and all related or
incidental licenses, rights and interests, whether considered to be
real, personal or mixed property, including the right and authority to
transfer or relinquish any or all such rights and the right to any
credit, refund, reimbursement or rebate for utilities facilities
construction or installation or for any reservation fee, standby fee
or capital recovery charge promised, provided or paid for by Trustor
to the full extent now allocated or allocable to the Land or the
buildings and improvements thereon, plus all additional Utilities
Capacity, if any, not dedicated or reserved to the Land or the
buildings and improvements thereon but which is now or hereafter owned
or controlled by Trustor, to the full extent that such additional
Utilities Capacity is necessary to allow development and use of the
Land or the buildings and improvements thereon for their highest and
best use;
(e) All rents, additional rents, issues, income, revenues, distributions,
royalties and profits now or in the future payable in respect of the
Leased Property or any portion thereof or the ownership, use, leasing
or occupancy of the Leased Property or any portion thereof
(collectively, the "Rents") and any lien in favor of Trustor created
-----
by the Lease, together with all of the right, power, and authority of
Trustor or Trustee to alter, modify or change the terms, conditions
and provisions of the Lease or of any residential leases of units in
the Leased Property, to consent to any request made by a tenant or
landlord pursuant thereto, or to surrender, cancel or terminate the
same or to accept any surrender, cancellation or termination of the
same, together with all of the options, rights, powers and privileges
of Trustor under each such residential lease, whether heretofore or
hereafter existing. Without limiting the generality of the foregoing,
the Rents shall include all rents and other sums payable to Trustor by
any lessee of a unit or other space in the Leased Property, whether
for use and occupancy of such unit or space or for other goods and
services;
(f) Any and all awards, damages, payments, insurance proceeds and other
compensation, and any and all claims therefor and rights thereto,
which may result from taking or injury by virtue of the exercise of
the power of eminent domain, or any damage, injury or destruction in
any manner caused to the Land, the buildings and improvements thereon,
and the Personal Property, or any part thereof; and
-3-
<PAGE>
(g) All other estate, right, title, interest, property, possession, claim
and demand whatsoever of Trustor in the above described property, in
law as well as in equity, of, in and to the same and every part and
parcel thereof with the appurtenances and all the improvements,
rights, interests and benefits that go with it.
TO HAVE AND TO HOLD the Encumbered Property, together with every right,
privilege, hereditament and appurtenance belonging or appertaining to it, unto
Trustee, and Trustee's successors or substitutes in trust, for the benefit of
Beneficiary, its successors and assigns, to its and their own proper use,
benefit and behoove, forever. Trustor hereby binds Trustor and Trustor's
successors and assigns to forever WARRANT and DEFEND the Encumbered Property
unto Trustee and Trustee's successors or substitutes in trust, for the benefit
of Beneficiary, against the claims and demands of every person whomsoever
lawfully claiming or to claim the Encumbered Property or any part of it.
PROVIDED THAT, if Trustor shall well and truly pay, or there shall otherwise be
paid to Beneficiary, the Obligations at the time and in the manner provided in
the Lease Documents, and if Trustor shall well and truly abide by and comply
with each and every covenant and condition set forth in the Lease Documents,
then these presents and the lien and interests hereby transferred and assigned
shall cease, terminate and be void. Upon payment of the Obligations and
performance of the covenants aforesaid, Beneficiary shall release the Encumbered
Property and renounce any other rights granted to it herein, and shall execute,
at Trustor's expense, a release of this Leasehold Deed of Trust and any other
instrument to that effect deemed necessary or desirable.
ARTICLE II
----------
TRUSTOR COVENANTS AND AGREEMENTS
Trustor covenants and agrees as follows:
1. Definitions. Terms used herein that are defined in the Uniform
-----------
Commercial Code as adopted by the State of California, unless otherwise defined
herein or in the Lease, shall have the meanings specified in the Uniform
Commercial Code as adopted by the State of California.
2. Obligations. Trustor shall pay and perform the Obligations at the time
-----------
and in the manner provided in the Lease Documents, all of which are made a part
hereof as though set forth herein.
3. Performance. Trustor shall perform, comply and abide by all the terms
-----------
and covenants of the Lease Documents, all of which are made part hereof as
though set forth herein at length.
4. Security Agreement.
------------------
A. This Leasehold Deed of Trust constitutes a security agreement and
fixture filing under the California Uniform Commercial Code, and Trustor hereby
grants to Beneficiary a security interest in the Personal Property and any
fixtures constituting part of the buildings and improvements on the Land.
Trustor shall execute, deliver, file and refile any financing statements,
continuation statements, or other security agreements that Beneficiary may
require from time to time to confirm the lien and security interests granted
under and evidenced by this Leasehold Deed of Trust with respect to such
Personal Property and fixtures and to perfect and continue the perfection of
Beneficiary's security interest in such property, and hereby irrevocably
appoints Beneficiary attorney-in-fact to execute, deliver and file such
instruments for and on behalf of Trustor, such appointment to be coupled with an
interest. Notwithstanding any release of any or all of that property included
in the Encumbered Property which is deemed "real property", and proceedings to
foreclose this
-4-
<PAGE>
Leasehold Deed of Trust or its satisfaction of record, the security interest
granted hereunder and evidenced hereby shall survive until the repayment in full
of the Obligations and satisfaction in full of the obligations of Trustor. Upon
the occurrence of any Event of Default under this Leasehold Deed of Trust,
Beneficiary shall have the rights and remedies of a secured party under the
California Uniform Commercial Code, as well as all other rights and remedies
available under this Leasehold Deed of Trust or at law or in equity.
B. Except as otherwise permitted under the Lease, Trustor shall not
remove, or suffer to be removed, from the Encumbered Property any fixtures (as
the term "fixtures" is defined by the law in California) constituting part of
the buildings or improvements or Personal Property now upon, or in the future to
be incorporated into, installed in, annexed or affixed to the Encumbered
Property unless such fixtures or Personal Property have been replaced with
similar fixtures or personal property of equal or greater utility and value.
C. This Leasehold Deed of Trust shall be filed under Sections 9313
and 9402(6) of the California Uniform Commercial Code, as amended from time to
time, in the real estate record office of the County in which the Encumbered
Property is located and shall be effective as a financing statement filed as a
fixture filing from the date of its recording with respect to any and all
fixtures included in the Encumbered Property and with respect to any property
that may hereafter become such fixtures.
5. No Limitation on Transfer. In order to induce Beneficiary to advance
-------------------------
funds for the acquisition of fee title to the Leased Property and to enter into
the Lease, Trustor agrees that, in the event of any transfer of the Encumbered
Property, or any portion thereof, without the prior written consent of
Beneficiary, except as permitted by the Lease, Beneficiary shall have the
absolute right at its option, without demand or notice, to declare all sums
secured hereby immediately due and payable. Consent to one such transaction
shall not be deemed to be a waiver of the right to require consent to future or
successive transactions. Beneficiary may grant or deny such consent in its sole
discretion. In addition, if consent should be given, any such transfer shall be
subject to this Leasehold Deed of Trust, and any such transferee shall assume
all obligations hereunder and agree to be bound by all provisions contained
herein. Such assumption shall not, however, release Trustor or any guarantor
from any liability for the obligations under the Lease Documents without the
prior written consent of Beneficiary. As used herein, "transfer" includes the
assignment of Trustor's leasehold interest under the Lease, or the sale,
agreement to sell, transfer, conveyance or hypothecation of the Encumbered
Property, or any portion thereof or interest therein, whether voluntary,
involuntary, by operation of law or otherwise, the execution of any installment
land sale contract or similar instrument effecting all or a portion of said
Encumbered Property, or the lease of all or substantially all of said Encumbered
Property.
6. Assignment of Leases and Rents.
------------------------------
A. Trustor hereby irrevocably assigns to Beneficiary all of Trustor's
right, title and interest in, to and under: (a) all leases of the Encumbered
Property or any portion thereof, all licenses and agreements relating to the
management, leasing or operation of the Encumbered Property or any portion
thereof, and all other agreements of any kind relating to the use or occupancy
of the Encumbered Property or any portion thereof, whether now existing or
entered into after the date hereof ("Residential Leases"); and (b) the rents,
------------------
issues, deposits and profits of the Encumbered Property, including without
limitation, all amounts payable and all rights and benefits accruing to Trustor
under the Residential Leases ("Payments"). The term "Residential Leases" shall
-------- ------------------
also include all guarantees of and security for the lessees' performance
thereunder, and all amendments, extensions, renewals or modifications thereto
which are permitted hereunder. This is a present and absolute assignment, not
an assignment for security purposes only, and Beneficiary's right to the
Residential Leases and Payments is not contingent upon, and may be exercised
without possession of, the Encumbered Property.
-5-
<PAGE>
B. Beneficiary confers upon Trustor a license ("License") to collect
-------
and retain the Payments as they become due and payable, until the occurrence of
a Default (as hereinafter defined). Upon a Default, the License shall be
automatically revoked and Beneficiary may collect and apply the Payments without
notice and without taking possession of the Encumbered Property. Trustor hereby
irrevocably authorizes and directs the lessees under the Residential Leases to
rely upon and comply with any notice or demand by Beneficiary for the payment to
Beneficiary of any rental or other sums which may at any time become due under
the Residential Leases, or for the performance of any of the lessees'
undertakings under the Residential Leases, and the lessees shall have no right
or duty to inquire as to whether any Default has actually occurred or is then
existing hereunder. Trustor hereby relieves the lessees from any liability to
Trustor by reason of relying upon and complying with any such notice or demand
by Beneficiary.
C. The foregoing irrevocable Assignment shall not cause Beneficiary
to be: (a) a mortgagee in possession; (b) responsible or liable for the control,
care, management or repair of the Encumbered Property or for performing any of
the terms, agreements, undertakings, obligations, representations, warranties,
covenants and conditions of the Residential Leases; or (c) responsible or liable
for any waste committed on the Encumbered Property by the lessees under any of
the Residential Leases or any other parties; for any dangerous or defective
condition of the Encumbered Property; or for any negligence in the management,
upkeep, repair or control of the Encumbered Property resulting in loss or injury
or death to any lessee, licensee, employee, invitee or other person. Beneficiary
shall not directly or indirectly be liable to Trustor or any other person as a
consequence of: (i) the exercise or failure to exercise any of the rights,
remedies or powers granted to Beneficiary hereunder; or (ii) the failure or
refusal of Beneficiary to perform or discharge any obligation, duty or liability
of Trustor arising under the Residential Leases.
7. Advances. Upon the occurrence of an Event of Default under this
--------
Leasehold Deed of Trust, as and to the extent provided in the Lease, Beneficiary
may (in addition to any other rights and remedies it may have), at its option,
remedy such default, and all payments made by Beneficiary to remedy such default
(including reasonable attorney's fees) shall become part of the Obligations, and
Trustor covenants to repay the same to Beneficiary on demand and the same shall
bear interest at the Default Rate from the date of such advance until the date
paid by Trustor to Beneficiary. Payment of any such sums and the interest
thereon shall be secured by and subject to the lien and security interests of
this Leasehold Deed of Trust, prior to any other lien attaching to or accruing
subsequent to the lien and security interests of this Leasehold Deed of Trust.
8. Other Encumbrances.
------------------
Notwithstanding anything herein to the contrary, the rights of the
Beneficiary hereunder and the lien of this Leasehold Deed of Trust is subject
and subordinate in all respects to the Deed of Trust, Assignment of Leases and
Rents and Fixture Filing dated as of January 15, 1996 by and among Atrium
Venture, as trustor, First American Title Company, as trustee and Column
Financial, Inc. (which is now held by LaSalle National Bank, as Trustee for the
Registered Holders of DLJ Mortgage Acceptance Corp., Commercial Mortgage Pass-
Through Certificates, Series 1996-CF1), recorded as Instrument No. P168 at Page
------------
871, in such official records. Except as otherwise permitted under the Lease,
- ---
at no time during the term of this Leasehold Deed of Trust shall Trustor create,
incur, assume or suffer to exist any other mortgage, deed of trust, pledge,
lien, security interest, encumbrance, attachment, levy, distraint or other
judicial process and burdens of any kind or nature on or with respect to any of
the Encumbered Property without the prior written consent of Beneficiary and
shall defend, at Trustor's own cost, Trustor's rights in the Encumbered Property
and Beneficiary's security interest in the Encumbered Property against the
claims of all persons and entities.
-6-
<PAGE>
ARTICLE III
-----------
EVENTS OF DEFAULT
An Event of Default under the Lease shall be deemed a "Default" or an
-------
"Event of Default" under this Leasehold Deed of Trust.
----------------
ARTICLE IV
----------
REMEDIES
Upon the occurrence of any Event of Default and the expiration of any
applicable cure period, and at any time thereafter, Trustee and Beneficiary may,
at any time thereafter, at their option and without notice, exercise any or all
of the following remedies:
1. Acceleration. Beneficiary may declare the entire Obligations
------------
immediately due and payable, without presentment, demand, notice of intent to
accelerate, notice of acceleration or any other notice of any kind, all of which
are expressly waived.
2. Possession. Whether or not Beneficiary exercises the option provided
----------
in Section 1 of this Article IV, Beneficiary in person or by agent or by court
--------- ----------
appointed receiver may enter upon and take possession of the Encumbered
Property; lease and let the Encumbered Property; receive all the rents, income,
issues and profits thereof which are overdue, due or to become due; and apply
the same, after payment of all necessary charges and expenses, on account of the
amounts hereby secured. Beneficiary is given and granted full power and
authority to do any act or thing which Trustor or the successors or assigns of
Trustor who may then own the Encumbered Property might or could do in connection
with the management and operation of the Encumbered Property. This remedy shall
become effective with or without any action brought to foreclose this Leasehold
Deed of Trust and without applying at any time for a receiver of such rents. If
Trustor, its successors or assigns, or any other occupants of the Encumbered
Property shall hold possession of the Encumbered Property or any part thereof
subsequent to foreclosure hereunder, then Trustor or the party so holding
possession shall become and be considered as tenants at will of the purchaser or
purchasers at such foreclosure sale, and any such tenant at will failing or
refusing to surrender possession upon demand shall be guilty of forcible
detainer and shall be subject to eviction and removal; and provided, that
--------
Beneficiary's acceptance of rentals from Trustor or such occupant prior to
foreclosure shall not be deemed or construed to create any periodic tenancy or
leasehold interest of Trustor or such occupant which shall survive foreclosure.
3. Judicial Action. Beneficiary may bring an action in any court of
---------------
competent jurisdiction to foreclose this Leasehold Deed of Trust or to enforce
any of the provisions hereunder or under the Lease Documents.
4. Power of Sale. Beneficiary may elect to cause the Encumbered Property
-------------
or any part thereof to be sold under the power of sale herein granted in any
manner permitted by applicable law. In connection with any sale or sales
hereunder, Beneficiary may elect to treat any of the Encumbered Property which
consists of a right of action or which is property that can be severed from the
Land or any improvements thereon without causing structural damage as if the
same were personal property, and dispose of the same in accordance with the
applicable law, separate and apart from the sale of real property. Sales
hereunder of any personal property only shall be conducted in any manner
permitted by the California Uniform Commercial Code. Should Beneficiary elect
to sell the Encumbered Property or any part thereof, which is real property or
which
-7-
<PAGE>
Beneficiary has elected to treat as real property as provided above, Beneficiary
or Trustee shall give such notice of default and election to sell as then may be
required by law. Thereafter, upon the expiration of such time and the giving of
such notice of sale as then may be required by law, and without the necessity of
any demand on Trustor, Trustee, at the time and place specified in the notice of
sale, shall sell such real property or part thereof at public auction to the
highest bidder as provided by law. Trustee may, and upon request of Beneficiary
shall, from time to time, postpone any sale hereunder by public announcement at
the time and place of sale. Any person, including Trustor, Trustee, or
Beneficiary, may purchase at any sale hereunder, and Beneficiary shall have the
right to purchase at any sale hereunder by crediting upon the bid price the
amount of all or any part of the Obligations hereby secured. Should Beneficiary
desire that more than one sale or other disposition of the Encumbered Property
be conducted, Beneficiary may, at its option, cause the same to be conducted
simultaneously or successively, on such days and in such order as Beneficiary
may deem to be in its best interests, and no such sale shall terminate or
otherwise affect the lien of this Leasehold Deed of Trust on any part of the
Encumbered Property not sold until all Obligations secured hereby has been fully
paid. Whether Beneficiary elects to dispose of the Encumbered Property through
one or more sales, Trustor agrees to pay the costs and expenses of each such
sale and of any judicial proceedings wherein the same may be made, including
reasonable compensation to Trustee and Beneficiary, their agents, and legal or
other counsel, and to pay all expenses, liabilities, and advances made or
incurred by Trustee in connection with such sale or sales, with interest at the
lower of the Default Rate provided in the Lease or the maximum rate permitted by
law to be charged by Trustee. Upon any sale hereunder, Trustee shall execute and
deliver to the purchaser or purchasers a deed or deeds conveying the property so
sold, but without any covenant or warranty whatsoever, express or implied,
whereupon such purchaser or purchasers shall be let into immediate possession;
and the recitals in any such deed or deeds of facts regarding default, the
giving of notice of default or of sale, or the regularity or validity of the
sale shall be conclusive proof of the truth of such facts.
5. Appointment of Receiver. Beneficiary may have a receiver of the rents,
-----------------------
income, issues and profits of the Encumbered Property appointed without the
necessity of proving either the depreciation or the inadequacy of the value of
the security or the insolvency of Trustor or any person who may be legally or
equitably liable to pay moneys secured hereby, and Trustor and each such person
waive such proof and consent to the appointment of a receiver.
6. Excess Monies. Beneficiary may apply on account of the Obligations
-------------
still owing after a foreclosure sale of the Encumbered Property, whether or not
a deficiency action shall have been instituted, any funds in the hands of
Beneficiary that were paid by Trustor as an escrow or for any other reason.
7. Remedies at Law or Equity. Beneficiary may exercise any other of the
-------------------------
remedies otherwise available to it as a matter of law or equity, and all
remedies available to Beneficiary are cumulative of, and in addition to, any
other remedies provided for in this Leasehold Deed of Trust, any of the Lease
Documents or available at law or in equity.
8. Foreclosure Upon Personal Property Under the Uniform Commercial Code.
--------------------------------------------------------------------
In addition to and cumulative of any other remedies granted in this Leasehold
Deed of Trust to Beneficiary or the Trustee, upon the occurrence of an Event of
Default and the expiration of any applicable cure period and at any time
thereafter:
A. Beneficiary is authorized, in any legal manner and without breach
of the peace, to take possession of the Personal Property (Trustor hereby
WAIVING all claims for damages arising from or connected with any such taking)
and of all books, records and accounts relating thereto and to exercise without
interference from Trustor any and all rights which Trustor has with respect to
the management, possession, operation, protection or preservation of the
Personal Property. All costs, expenses, and liabilities incurred by
-8-
<PAGE>
Beneficiary in managing, operating, maintaining, protecting or preserving such
properties, or in processing, repairing and/or reconditioning the Personal
Property shall constitute a demand obligation owing by Trustor and shall bear
interest from the date of expenditure until paid at the Default Rate, all of
which shall constitute a portion of the Obligations secured hereby. If necessary
to obtain the possession provided for above, Beneficiary may invoke any and all
legal remedies to dispossess Trustor. In connection with any action taken by
Beneficiary pursuant to this Section, Beneficiary shall not be liable for any
loss sustained by Trustor from other act or omission of Beneficiary with respect
to the Personal Property unless such loss is caused by the willful misconduct
and bad faith of Beneficiary, nor shall Beneficiary be obligated to perform or
discharge any obligation, duty, or liability under any sale or lease agreement
covering the Personal Property or any part thereof or under or by reason of this
instrument or the exercise of rights or remedies hereunder.
B. Beneficiary may, without notice except as hereinafter provided, sell
the Personal Property or any part thereof at public or private sale (with or
without appraisal or having the Personal Property at the place of sale) for
cash, upon credit, or for future delivery, and at such price or prices as
Beneficiary may deem best, and Beneficiary may be the purchaser of any and all
of the Personal Property so sold and may apply the purchase price therefor to
any of the Obligations and thereafter hold the same absolutely free from any
right or claim of whatsoever kind. Upon any such sale Beneficiary shall have
the right to deliver, assign and transfer to the purchaser thereof the Personal
Property so sold. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right of whatsoever kind, including any equity
or right of redemption, stay or appraisal which Trustor has or may have under
any rule of law or statute now existing or hereafter adopted. To the extent
notice is required by applicable law, Beneficiary shall give Trustor written
notice at Trustor's address set forth herein (which shall satisfy any
requirement of notice or reasonable notice in any applicable statute) of
Beneficiary's intention to make any such public or private sale. Such notice
(if any is required by applicable law) shall be personally delivered or mailed,
postage prepaid, at least twenty (20) calendar days before the date fixed for a
public sale, or at least twenty (20) calendar days before the date after which
the private sale or other disposition is to be made, unless the Personal
Property is of a type customarily sold on a recognized market, is perishable or
threatens to decline speedily in value. Such notice (if any is required by
applicable law), in case of public sale, shall state the time and place fixed
for such sale or, in case of private sale or other disposition other than a
public sale, the time after which the private sale or other such disposition is
to be made. Any public sale shall be held at such time or times, within the
ordinary business hours and at such place or places, as Beneficiary may fix in
the notice of such sale. At any sale the Personal Property may be sold in one
lot or an entirety or in separate parcels as Beneficiary may determine.
Beneficiary shall not be obligated to make any sale pursuant to any such notice.
Beneficiary may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at any
time and place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned. In case of any sale of all or any
part of the Personal Property on credit or for future delivery, the Personal
Property so sold may be retained by Beneficiary until the selling price is paid
by the purchaser thereof, but Beneficiary shall incur no liability in case of
the failure of such purchaser to take up and pay for the Personal Property so
sold, and in case of any such failure, such Personal Property may again be sold
upon like notice. Each and every method of disposition described in this Section
shall constitute disposition in a commercially reasonable manner.
C. Beneficiary shall have all the rights of a secured creditor after
default under the Uniform Commercial Code of California and in conjunction with,
in addition to or in substitution for those rights and remedies:
(i) Beneficiary may require Trustor to assemble the Personal Property
and make it available at a place Beneficiary designates which is mutually
convenient to allow Beneficiary to take possession or dispose of the Personal
Property, or, in the alternative, Beneficiary may retain an independent party or
parties to assemble the Personal Property and to take, store and/or prepare such
Personal Property for sale; and
-9-
<PAGE>
(ii) it shall not be necessary that Beneficiary take possession
of the Personal Property or any part thereof before the time that any sale
pursuant to the provisions of this Section is conducted and it shall not be
necessary that the Personal Property or any part thereof be present at the
location of such sale; and
(iii) before application of the proceeds of disposition of the
Personal Property to the Obligations, such proceeds shall be applied to the
reasonable expenses of retaking, holding, preparing for sale or lease, selling,
leasing and the like and the reasonable attorneys' fees and legal expenses
incurred by Beneficiary and any interest thereon; and
(iv) the sale by Beneficiary of less than the whole of the
Personal Property shall not exhaust the rights of Beneficiary hereunder, and
Beneficiary is specifically empowered to make successive sales hereunder until
the whole of the Personal Property shall be sold; and, if the proceeds of such
sale of less than the whole of the Personal Property shall be less than the
aggregate of the Obligations secured hereby, this Leasehold Deed of Trust and
the security interest granted hereunder and evidenced hereby shall remain in
full force and effect as to the unsold portion of the Personal Property; and
(v) in the event any sale hereunder is not completed or is
defective in the opinion of Beneficiary, such sale shall not exhaust the rights
of Beneficiary hereunder and Beneficiary shall have the right to cause a
subsequent sale or sales to be made hereunder; and
(vi) any and all statements of fact or other recitals made in
any bill of sale or assignment or other instrument evidencing any foreclosure
sale hereunder as to nonpayment of any Obligations or as to the occurrence of
any default, or as to Beneficiary having declared all of such Obligations to be
due and payable, or as to notice of time, place and terms of sale and the
Personal Property to be sold having been duly given, or as to any other act or
thing having been duly done by Beneficiary, shall be taken as prima facie
evidence of the truth of the facts so stated and recited; and
(vii) Beneficiary may appoint or delegate any one or more
persons as agent to perform any act or acts necessary or incident to any sale
held by Beneficiary, including the sending of notices and the conduct of sale,
but in the name and on behalf of Beneficiary; and
(viii) demand of performance, advertisement and presence of
property at sale are hereby WAIVED and Beneficiary is hereby authorized to sell
hereunder any evidence of indebtedness it may hold as security for the secured
Obligations. All demands and presentments of any kind or nature are expressly
WAIVED by Trustor. Trustor WAIVES the right to require Beneficiary to pursue any
other remedy for the benefit of Trustor and agrees that Beneficiary may proceed
against any obligor for the amount of the Obligations owed to Beneficiary
without taking any action against any other obligor or any other person or
entity and without selling or otherwise proceeding against or applying any of
the Personal Property in Beneficiary's possession.
9. Application of Proceeds. All payments and proceeds received under
this Article IV of this Leasehold Deed of Trust shall be applied to satisfy the
Obligations in accordance with the terms of the Lease.
ARTICLE V
---------
MISCELLANEOUS
-------------
-10-
<PAGE>
1. Cumulative Rights. The rights and remedies herein expressed to be
-----------------
vested in or conferred upon Beneficiary or Trustee shall be cumulative and shall
be in addition to and not in substitution for or in derogation of the rights and
remedies conferred by any applicable law.
2. Waiver.
------
A. The failure, at any one or more times, of Beneficiary to assert the
right to declare the Obligations due or the granting of any extension or
extensions of time of payment or performance of the Lease or any of the other
Obligations, either to the Trustor or to any other person, or taking of other or
additional security for the payment thereof, or releasing any security, or
changing any of the terms of this Leasehold Deed of Trust, or any Lease
Documents or any Obligation secured by this Leasehold Deed of Trust, or waiver
of or failure to exercise any right under any covenant or stipulation herein
contained, shall not in any way affect this Leasehold Deed of Trust nor the
rights of Beneficiary hereunder or operate as a release from any personal
liability under any Lease Document or other Obligation secured by this Leasehold
Deed of Trust, or under any covenant or stipulation herein contained or any
other part of the Obligations. The acceptance by Beneficiary of any payments
hereunder after the occurrence of an Event of Default shall not be deemed to be
a waiver.
B. Beneficiary may, by written notice to Trustor, waive any Event of
Default hereunder and its consequences and rescind any acceleration of maturity
of the Obligations. Any such waiver shall be limited to the particular Event of
Default so waived and shall not be deemed to be a waiver of any other Event of
Default and shall in no way affect Beneficiary's ability to exercise its rights
upon the occurrence of any other Event of Default.
3. Agreement to Pay Attorneys' Fees and Expenses. Upon the occurrence of
---------------------------------------------
an Event of Default, as a result of which Beneficiary shall employ attorneys or
incur other expenses for the collection of payments due or to become due or the
enforcement or performance or observance of any obligation or agreement on the
part of Trustor contained herein, Trustor shall, on demand, pay to Beneficiary,
the reasonable fee of such attorneys and such other reasonable expenses so
incurred by Beneficiary, regardless of whether a lawsuit is filed or appeal
taken.
4. Usury Not Intended; Savings Provisions. Notwithstanding any provision
--------------------------------------
to the contrary contained in this Leasehold Deed of Trust or any other Lease
Document, it is expressly provided that in no case or event shall the aggregate
of any amounts accrued or paid pursuant to this Leasehold Deed of Trust or any
other Lease Document which under applicable laws are or may be deemed to
constitute interest ever exceed the maximum legal rate (the "Maximum Rate"). In
------------
this connection, Trustor and Beneficiary stipulate and agree that it is their
common and overriding intent to contract in strict compliance with applicable
usury laws. In furtherance thereof, none of the terms of this Leasehold Deed of
Trust or any other Lease Document shall ever be construed to create a contract
to pay, as consideration for the use, forbearance or detention of money,
interest at a rate in excess of the Maximum Rate. Trustor shall never be liable
for interest in excess of the Maximum Rate. If, for any reason whatever, such
interest paid or received during the full term of the Obligations produces a
rate which exceeds the Maximum Rate, Beneficiary shall credit against the
principal of such Obligations (or, if such Obligations shall have been paid in
full, shall refund to the payor of such interest) such portion of said interest
as shall be necessary to cause the interest paid to produce a rate equal to the
Maximum Rate. All sums paid or agreed to be paid to Beneficiary for the use,
forbearance or detention of money shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread in equal parts throughout the
full term of the Obligations, so that the interest rate is uniform throughout
the full term of the Obligations. The provisions of this Section shall control
all agreements, whether now or hereafter existing and whether written or oral,
between Trustor and Beneficiary.
-11-
<PAGE>
5. Notices. All notices and other communications provided for in this
-------
Leasehold Deed of Trust and the other Lease Documents to which Trustor is a
party shall be given in the manner and with the effect set forth in the Lease.
6. Applicable Law; Venue. This Leasehold Deed of Trust shall be governed
---------------------
by and construed in accordance with the laws of the State of California and the
applicable laws of the United States of America. Any action or proceeding
against Trustor under or in connection with any of the Lease Documents may be
brought in Santa Clara County, California, or in any other court of proper
venue. Trustor hereby irrevocably submits, and waives any objection it may now
or hereafter have, as to the venue of any such action or proceeding brought in
Santa Clara County, California. Nothing herein shall limit the right of
Beneficiary to bring any action or proceeding against Trustor or with respect to
any of its property in courts in other jurisdictions.
7. Headings. The headings, captions, and arrangements used in this
--------
Leasehold Deed of Trust are for convenience only and shall not affect the
interpretation of this Leasehold Deed of Trust.
8. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties made in this Leasehold Deed of Trust or in any certificate delivered
pursuant hereto shall survive the execution and delivery of this Leasehold Deed
of Trust, and no investigation by Beneficiary shall affect the representations
and warranties or the right of Beneficiary to rely upon them.
9. Obligations Absolute. The obligations of Trustor under this Leasehold
--------------------
Deed of Trust shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including, without limitation, any acts or circumstances that may constitute
failure of consideration, destruction of, or damage to, the Encumbered Property,
commercial frustration of purpose, any change in the laws of the United States
of America or of the State of California or any political subdivision of either,
any amendment, modification, extension, or renewal of this Leasehold Deed of
Trust, the Obligations, or any document or instrument evidencing, securing, or
otherwise relating to the Obligations, or any release or subordination of
collateral, or any waiver, consent, extension, indulgence, compromise,
settlement, or other action or inaction in respect of this Leasehold Deed of
Trust, the Obligations, or any document or instrument evidencing, securing, or
otherwise relating to the Obligations, any exercise or failure to exercise any
right, remedy, power, or privilege in respect of the Obligations, or any failure
of Beneficiary to perform or observe any agreement, whether express or implied,
or any duty, liability or obligation, arising out of or connected with this
Leasehold Deed of Trust.
10. Nonliability of Beneficiary. Trustor hereby agrees that neither
---------------------------
Beneficiary's acceptance of the security interests granted hereunder nor any
exercise by Beneficiary of its rights and remedies hereunder shall be deemed to
be an assumption by Beneficiary of any of Trustor's obligations and liabilities
under the terms of any of the Encumbered Property.
11. Heirs, Successors and Assigns. All of the terms, covenants,
-----------------------------
provisions and conditions herein contained shall be for the benefit of, apply
to, and bind the heirs, successors and assigns of Trustor and Beneficiary, and
are intended and shall be held to be real covenants running with the Land. The
term "Trustor" shall also include any and all subsequent owners and successors
in title of the Encumbered Property and the term "Beneficiary" shall include any
holder and owner from time to time (including without limitation any pledgee or
assignee) of the Leased Property and the lessor's interest under the Lease, or
any other Obligation. As applicable, each Trustor shall be jointly and
severally liable hereon.
-12-
<PAGE>
12. Gender. When such interpretation is appropriate, any word denoting
------
gender used herein shall include all persons, natural or artificial, and words
used in the singular shall include the plural and vice versa.
13. Inspection. Beneficiary shall have the right exercisable by
----------
Beneficiary or its representatives to inspect from time to time the Encumbered
Property at any reasonable time during the term of this Leasehold Deed of Trust.
14. Subrogation. In the event Beneficiary pays or causes to be paid any
-----------
prior lien, Beneficiary shall be subrogated to the rights of the holder of such
lien as fully as if such lien had been assigned to Beneficiary.
15. Modification of Leasehold Deed of Trust. This Leasehold Deed of Trust
---------------------------------------
is subject to modification as defined under the laws of California and any such
modification shall relate back to and have the same priority as this Leasehold
Deed of Trust as if such modification were incorporated herein.
16. Modifications in Writing. The terms of this Leasehold Deed of Trust
------------------------
may not be changed orally but only by an agreement in writing signed by Trustor
and Beneficiary.
17. No Third Party Beneficiaries. Nothing herein expressed or implied is
----------------------------
intended or shall be construed to confer upon any person other than the Trustee
and Beneficiary and their respective successors and assigns any right, remedy or
claim under or by reason hereof. All covenants, stipulations and agreements
herein contained by and on behalf of Trustor shall be for the sole and exclusive
benefit of Beneficiary and its successors and assigns.
18. Date of Leasehold Deed of Trust. The date of this Leasehold Deed of
-------------------------------
Trust shall be for identification purposes only and shall not be construed to
imply that this Leasehold Deed of Trust was executed on any date other than the
respective dates of the acknowledgments of the parties hereto. This Leasehold
Deed of Trust shall become effective upon its delivery.
19. Beneficiary's Consent or Approval. With respect to any provision of
---------------------------------
this Leasehold Deed of Trust and/or the Lease Documents which provide that
Trustor shall obtain Beneficiary's prior consent or approval, Beneficiary may
withhold such consent or approval for any reason at its sole discretion, unless
the provision specifically states that the consent or approval of Beneficiary
will not be unreasonably withheld.
20. Reconveyance. Upon the performance of all Obligations and the payment
------------
in full of all sums secured by this Leasehold Deed of Trust, Beneficiary shall
request Trustee to reconvey the Encumbered Property. Upon payment of its fees
and any other sums owing to it under this Leasehold Deed of Trust, Trustee shall
reconvey the Encumbered Property without warranty to the person or persons
legally entitled thereto. Such person or persons shall pay all costs of
recordation, if any. The recitals in such conveyance of any matters or facts
shall be conclusive proof of the truthfulness thereof. The grantee in such
reconveyance may be described as "the person or persons legally entitled
thereto."
21. Substitution of Trustee. Beneficiary may remove Trustee at any time
-----------------------
or from time to time and may appoint a successor trustee, and upon such
appointment all powers, rights, duties and authority of Trustee shall thereupon
become vested in the successor. The successor trustee shall be appointed by
written instrument duly recorded in the county where the Encumbered Property is
located.
-13-
<PAGE>
22. Request for Notices. Trustor hereby requests that a copy of any
-------------------
notice of default and notice of sale as may be required by law be mailed to
Trustor at its address above stated.
23. Severability. If any provision of this Leasehold Deed of Trust shall
------------
for any reason be held unenforceable in any respect, such unenforceability shall
not affect any other provision of this Leasehold Deed of Trust.
24. Entire Agreement. This Leasehold Deed of Trust together with the
----------------
other Lease Documents constitute the entire agreement and understanding between
Trustor and Beneficiary with respect to the subject matter hereof and thereof
and supersede all prior conflicting or inconsistent agreements, consents and
understandings relating to such subject matter. Trustor acknowledges and agrees
that there is no oral agreement between Trustor and Beneficiary which has not
been incorporated in the Lease Documents or this Leasehold Deed of Trust.
25. WAIVER OF JURY TRIAL: TRUSTOR HEREBY WAIVES ANY AND ALL RIGHTS THAT
--------------------
IT MAY NOW OR HEREAFTER HAVE UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR
ANY STATE, TO A TRIAL BY JURY OF ANY AND ALL ISSUES ARISING DIRECTLY OR
INDIRECTLY IN ANY ACTION OR PROCEEDING RELATING TO THIS LEASEHOLD DEED OF TRUST,
THE LEASE DOCUMENTS OR ANY TRANSACTIONS CONTEMPLATED THEREBY OR RELATED THERETO.
IT IS INTENDED THAT THIS WAIVER SHALL APPLY TO ANY AND ALL CAUSES OF ACTION,
DEFENSES, RIGHTS, CLAIMS AND/OR COUNTERCLAIMS, WHETHER IN CONTRACT, TORT OR
OTHERWISE, IN ANY SUCH ACTION OR PROCEEDING. TRUSTOR UNDERSTANDS THAT THIS
WAIVER IS A WAIVER OF A CONSTITUTIONAL SAFEGUARD, AND TRUSTOR BELIEVES THAT
THERE ARE SUFFICIENT ALTERNATE PROCEDURAL AND SUBSTANTIVE SAFEGUARDS, INCLUDING
A TRIAL BY AN IMPARTIAL JUDGE, THAT ADEQUATELY OFFSET THE WAIVER CONTAINED
HEREIN.
-14-
<PAGE>
IN WITNESS WHEREOF, Trustor has executed and delivered this Leasehold
Deed of Trust as of the date first above written.
TRUSTOR:
-------
BROOKDALE LIVING COMMUNITIES OF CALIFORNIA, INC.,
a Delaware corporation
By: __________________________________
Its: _________________________________
STATE OF __________________ )
COUNTY OF _______________ )
On ______________, 1998, before me, a Notary Public in and for said State,
personally appeared _________________ as _________________ of Brookdale Living
Communities of California, Inc., personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that she/he executed the same in
her/his authorized capacity, and that by her/his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
Signature ________________________ (Seal)
My Commission Expires:
-15-
<PAGE>
EXHIBIT "A"
----------
PROPERTY DESCRIPTION
ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF SANTA
CLARA, DESCRIBED AS FOLLOWS:
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<PAGE>
EXHIBIT 10.4
19472/8
Agenda No. 1.9
Pledge and Security
Agreement
(Cash, Cash Equivalents and
Investment Property)
PLEDGE AND SECURITY AGREEMENT
-----------------------------
(Cash, Cash Equivalents and Investment Property)
This Pledge and Security Agreement ("Agreement") dated as of May 11, 1998
is made by and among Brookdale Living Communities of California, Inc., a
Delaware corporation ("Debtor") and The Atrium of San Jose LLC, a Delaware
limited liability company (the "Owner") and in favor of Key Corporate Capital,
Inc., a Michigan corporation ("KCCI" or the "B Investor") and SELCO Service
Corporation, an Ohio corporation ("SELCO"). Wilmington Trust Company, a
Delaware banking corporation (the "Valuation Agent") and LaSalle National Bank,
a national banking association ("Account Custodian") each joins in this
Agreement for certain purposes.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Owner, as landlord, and Debtor, as lessee, have entered into that
certain Lease Agreement dated as of May 11, 1998 (the "Lease") pursuant to which
Owner has leased from the Owner certain land and improvements located in San
Jose, County of Santa Clara, California; and
WHEREAS, the Lease provides that Debtor will pay Basic Rental for the Basic
Lease Term in an amount specified on Exhibit B thereto and that such Basic
Rental shall consist of four separate components, namely (i) Senior Loan Debt
Service, (ii) A Investor Loan Debt Service, (iii) B Investor Loan Debt Service,
and (iv) SELCO Basic Rent; and
WHEREAS, KCCI is entitled to receive the B Investor Loan Debt Service and
SELCO is entitled to receive SELCO Basic Rent from the Basic Rental payable by
the Debtor under the Lease;
WHEREAS, the Debtor has agreed to collateralize its obligations under the
Lease (including, without limitation, its obligations to make payments of Basic
Rental, the End of Term Adjustment, the Purchase Price, the Termination Value
and any other amounts which are payable by the Debtor under the Lease) and to
collateralize any other obligations of the Debtor under the other Transaction
Documents to the Owner (the "Obligations"); and
WHEREAS, Debtor shall cause Fleet National Bank to issue the Certificates
of Deposit described herein and shall pledge the same to the Owner to
collateralize the Obligations; and
WHEREAS, the Owner has executed and delivered to KCCI and SELCO a Non-
recourse Guaranty Agreement of even date herewith (the "Guaranty") to guarantee
the payment of the B Investor Debt Service and the SELCO Basic Rental to KCCI
and SELCO, respectively, and to
<PAGE>
secure its obligations under the Guaranty the Owner has agreed to pledge,
assign, set-over and convey all of the Owner's right title and interest in and
to this Agreement, the Certificates of Deposit and any other Collateral pledged
hereunder by Debtor to B Investor.
NOW, THEREFORE, in consideration of these premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Defined Terms. All capitalized terms which are used herein which are
-------------
not otherwise defined herein shall have the meanings ascribed to such terms in
the Definitions Appendix attached to the Lease. This Agreement is given by
Debtor as security for the Lease and the other Transaction Documents to which
Debtor is a party and all rights, interests, and remedies of the Owner hereunder
are cumulative and in addition to the rights, interests and remedies of the
Owner under the Lease and the other Transaction Documents to which Debtor is a
party, all of which are ratified, confirmed, adopted and approved. The
assignment of this Agreement by Owner to KCCI and SELCO is given to secure the
rights of KCCI and SELCO to receive the B Investor Debt Service and the SELCO
Basic Rent, but shall not limit or otherwise affect the rights of KCCI and SELCO
under the terms of the Participation Agreement. The following terms when used
herein shall have the respective meanings set forth in this Section.
A. "Acceptable CD Issuer" means a bank organized and existing under the
--------------------
laws of the United States of America (or any state thereof) and having
a rating on its senior unsecured debt of not less than "A" from S&P
and an equivalent rating from Moody's.
B. "Account Custodian" means LaSalle National Bank, a national banking
-----------------
association.
C. "Account Funds" mean any and all moneys or funds from time to time
-------------
credited to or on deposit in the Collateral Account.
D. "Agreement" means this Pledge and Security Agreement (Cash, Cash
---------
Equivalents and Investment Property) as it may be amended,
supplemented or otherwise modified, from time to time.
E. "Book-Entry Government Security": a security described in the
------------------------------
definition of "Cash Equivalents" which is in the form of a book-entry
on the records of the Federal Reserve.
F. "B Investor Certificate of Deposit" means certificate of deposit
---------------------------------
number __________ in the original principal amount not less than the B
Investor Required Amount issued by Fleet National Bank at the request
of Debtor to collateralize the Obligations, and any substitutions or
renewals of the same issued by Fleet National Bank or an Acceptable CD
Issuer.
G. "B Investor Required Amount" means the sum of (i) $_________, plus
--------------------------
(ii) the Capitalized Interest on the B Investor Loan (as defined in
Exhibit B to the Lease).
-2-
<PAGE>
H. "Cash Collateral": collectively, all cash and Cash Equivalents at any
---------------
time and from time to time on deposit in, and otherwise to the credit
of, the Collateral Account or otherwise held by, or in the name of,
KCCI and SELCO or their nominee under this Agreement.
I. "Cash Equivalents": (a) securities issued by the United States
----------------
Government or by any agency or instrumentality thereof, (b) banker's
acceptances and certificates of deposit acceptable to KCCI and SELCO
in their sole reasonable discretion, (c) repurchase obligations
acceptable to KCCI and SELCO in their sole reasonable discretion with
a term of not more than 30 days for underlying securities of the types
described in clauses (a) and (b) entered into with any bank meeting
the qualifications specified in clause (b) above, provided that the
collateral for such repurchase obligations is held by KCCI, SELCO or
the Custodian pursuant to Section 4 hereof, and (d) a Certificate of
Deposit.
J. "Certificated Security": as defined in Section 8-102 of the UCC.
---------------------
K. "Certificates of Deposit" means the B Investor Certificate of Deposit
-----------------------
and the SELCO Certificate of Deposit.
L. "Clearing Corporation": as defined in Section 8-102 of the UCC.
--------------------
M. "Clearing Corporation Security" means a Certificated Security that is
-----------------------------
(a) physically located in the State of Ohio in the custody of a
Clearing Corporation or its nominee, which is subject to the control
of such Clearing Corporation and (b) in bearer form or endorsed in
blank by an appropriate person or registered in the name of such
Clearing Corporation or its nominee and is shown in the account of or
on behalf of a Financial Intermediary of the Debtor on the books of
such Clearing Corporation.
N. "Collateral" means all of the following: (a) the Certificates of
----------
Deposit, (b) all Securities; (c) all Cash Collateral; (d) the
Collateral Account and all Account Funds therein; (e) all Instruments
and Documents and General Intangibles related to, arising out of or
evidencing the Certificates of Deposit, Securities, Cash Collateral,
Collateral Account, now or hereafter arising, including (without
limitation) (i) all moneys, residues and property of any kind due and
to become due under any contract or in any depository account, (ii)
any damages arising out of or for breach or default in respect of such
Instruments and Documents, or General Intangibles and (iii) all other
amounts from time to time paid or payable under or in connection
therewith; (f) all certificates, securities, instruments, documents,
contracts and agreements from time to time evidencing or constituting
any of the foregoing; (g) all cash dividends, stock dividends, cash,
instruments profits, premiums, redemptions, warrants, substitutions,
exchanges, distributions and other property now or hereafter made in
respect of any Certificates of Deposit or Securities or Cash
Collateral or the Collateral Account and all collections, rights and
claims in respect of any of the foregoing; and (h) to the extent not
otherwise included in the foregoing, all
-3-
<PAGE>
accessions and additions to, and replacements, Proceeds and products
of any and all of the foregoing.
O. "Collateral Account" means the Collateral Account established with the
------------------
Account Custodian defined in Section 3 hereof.
P. "Custodian" means KeyBank National Association as custodian and
---------
designee of KCCI and SELCO or any successor designated by KCCI and
SELCO.
Q. "Financial Intermediary": as defined in Section 8-313 of the UCC.
----------------------
R. "General Intangibles" means all "general intangibles", as such term is
-------------------
defined in Section 9-106 of the UCC, and all intangible personal
property not included in Instruments and Documents, now or hereafter
owned or acquired by Debtor.
S. "Instruments and Documents" means all "instruments," "documents,"
-------------------------
"deposit accounts," and "chattel paper," as defined in Section 9-105
of the UCC, and includes (without limitation) all warehouse receipts
and other documents of title, policies and certificates of insurance,
checking, savings, and other bank accounts, certificates of deposit,
checks, notes and drafts, now or hereafter acquired.
T. "Negotiable Instrument" means a negotiable instrument as defined in
---------------------
Section 3-104 of the UCC.
U. "Obligations" is defined in the preamble.
-----------
V. "Proceeds" has the meaning given such term under the UCC and, in any
--------
event, includes (but is not limited to) (a) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable from time to
time with respect to any of the Collateral, (b) any and all payments
(in any form whatsoever) made or due and payable from time to time in
connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental
authority (or any Person acting under color of governmental
authority), (c) whatever is received upon any collection, exchange,
sale, lease or other disposition of any of the Collateral and any
property into which any of the Collateral is converted, whether cash
or non-cash proceeds, and (d) any and all other products of, or any
rents, profits or other amounts from time to time paid or payable
under, or in connection with, any of the Collateral.
W. "Required Amount" means an amount equal to the sum of the B Investor
---------------
Required Amount and the SELCO Required Amount.
X. "Secured Party" means the Owner, KCCI and SELCO.
-------------
Y. "Securities" means the Certificated Securities, Uncertificated
----------
Securities and financial instruments transferred by Debtor to the
Owner and held in the Collateral Account and all replacements,
substitutions, exchanges and Proceeds thereof.
-4-
<PAGE>
Z. "SELCO Certificate of Deposit" means certificate of deposit number
----------------------------
__________ in the original principal amount not less than the SELCO
Required Amount issued by Fleet National Bank at the request of Debtor
to collateralize the Obligations and any substitutions or renewals of
the same issued by Fleet National Bank or an Acceptable CD Issuer.
AA. "SELCO Contribution" means $954,000, or so much thereof as may be
------------------
outstanding.
BB. "SELCO Required Amount" means the amount of the SELCO Contribution,
---------------------
plus any accrued but unpaid interest or return thereon or any other
amounts which are payable to SELCO as a part of the SELCO Basic Rent.
CC. "UCC" means the Uniform Commercial Code as it may from time to time be
---
in effect in the State of Delaware, or any other applicable
jurisdiction.
DD. "Uncertificated Security" means uncertificated security as defined in
-----------------------
Section 8-102 of the UCC.
2. Grant of Security Interest; Deposit of Certificate of Deposit and
-----------------------------------------------------------------
Other Collateral.
- ----------------
(a) Debtor agrees that it shall deposit with the Custodian or another
designee of KCCI and SELCO the Certificates of Deposit. The B Investor
Certificate of Deposit shall be issued in a initial principal amount of not less
than the B Investor Required Amount and the interest payable thereon shall be
capitalized and added to the principal amount thereof. The SELCO Certificate of
Deposit shall be issued in a initial principal amount of not less than the SELCO
Required Amount.
(b) The Debtor hereby grants to Owner a continuing security interest in, a
lien upon, and a right of set-off against, and hereby assigns to Owner as
security, the Collateral. The Owner hereby grants to KCCI and SELCO a
continuing security interest in, a lien upon, and a right of set-off against,
and hereby assigns to KCCI and SELCO as security for the obligations of Owner
under the Guaranty all of the Owner's right, title and interest in and to the
Collateral and this Agreement. The Debtor hereby acknowledges, consents and
agrees to the assignment by the Owner of its security interest in the Collateral
to KCCI and SELCO and the assignment by Owner of its right, title and interest
in the Agreement to KCCI and SELCO. KCCI's and SELCO's sole recourse against
Owner with respect to the Guaranty and this Agreement is limited to the
Collateral and the proceeds thereof notwithstanding anything herein or the
Guaranty to the contrary.
(c) (i) The Debtor agrees to cause Fleet National Bank or an Acceptable CD
Issuer (if Fleet National Bank is not then an Acceptable CD Issuer) to issue (i)
a new B Investor Certificate of Deposit in a principal amount of not less the
then current B Investor Required Amount on or prior to the maturity of such
Certificate of Deposit and (ii) a new SELCO Certificate of Deposit in a
principal amount of not less the then current SELCO Required Amount on or prior
to the maturity of such Certificate of Deposit. The failure to cause Fleet
National Bank (or another
-5-
<PAGE>
Acceptable CD Issuer) to issue new Certificates of Deposit shall entitle the
Custodian to retain the existing Certificates of Deposit without any obligation
to reinvest the funds payable on the Certificate of Deposit upon maturity and
KCCI and/or SELCO may apply the proceeds thereof to the payment of the B
Investor Loan, the SELCO Contribution and any other amounts payable to either
KCCI and/or SELCO under the terms of the Participation Agreement.
(ii) If (A) the senior unsecured debt rating of Fleet National Bank
or such other issuer of the Certificate of Deposit falls below "A" by S&P (or
its equivalent by Moody's), (B) Fleet National Bank is unable to continue to
provide the Certificates of Deposit, or (C) the Debtor, the Owner, KCCI and
SELCO agree that it would be advisable to cause the Certificates of Deposit to
be provided by another issuer, then the Debtor shall cause new Certificates of
Deposit to be issued by an Acceptable CD Issuer in the applicable Required
Amounts within five (5) Business Days after notice is given to Debtor of such
event and shall deliver the same to the Custodian or another designee of KCCI
and SELCO.
(iii) At the time of the delivery of any new or replacement
Certificates of Deposit, the Debtor shall provide the Owner, KCCI and SELCO with
a Certificate of its President and Chief Financial Officer certifying that the
Debtor is solvent as of the date of the issuance of the new or replacement
Certificates of Deposit. After the delivery of the new or replacement
Certificates of Deposit and the certificate of the Debtor regarding solvency,
the Owner shall cause the Certificates of Deposit maturing or being replaced to
be returned to Debtor.
(iv) All Certificates of Deposit shall be delivered to the Custodian,
who shall hold the same for the benefit of KCCI and SELCO. KCCI and SELCO hereby
appoint the Custodian as their agent for retaining physical possession of the
Certificates of Deposit in accordance with the terms of this Agreement.
(d) (i) The Valuation Agent shall determine monthly on the 15th day of
each month (or the next succeeding Business Day, if the 15th day is not a
Business Day), commencing June 15, 1998 (each such date of valuation being
referred to herein as a "Valuation Date") (x) the principal amount of the B
Investor Certificate of Deposit (including all interest thereon which has been
earned and capitalized) as of such Valuation Date (the "B Investor Certificate
Value"), and (y) by obtaining values from the issuer of the Certificates of
Deposit and at least one reputable broker of certificates of deposit, the fair
market sales value of both the B Investor Certificate of Deposit and the SELCO
Certificate of Deposit if sold prior to maturity thereof as of the Valuation
Date as the higher of the two values received (the "Sales Value"), and (z) the
ratings of the senior long-term unsecured debt of the issuer of the Certificates
of Deposit issued by both S&P and Moody's from a source the Valuation Agent
deems appropriate. Each such valuation shall be binding on the Debtor, the
Owner, KCCI and SELCO, absent manifest error. On each Valuation Date, in the
event the aggregate Sales Values of the Certificates of Deposit plus any Account
Funds in the Collateral Account (as shall be reported by the Account Custodian
at the Valuation Agent's request) is less than the sum of the B Investor
Certificate Value plus the SELCO Required Amount (as shall be reported by SELCO
at the Valuation Agent's request) ( a "Deficiency"), then the Valuation Agent
shall give written notice of such Deficiency in such form as the Valuation Agent
deems appropriate within two (2) Business
-6-
<PAGE>
Days after the Valuation Date via (xx) overnight mail or hand delivery and (yy)
facsimile transmission, to each of Debtor, KCCI, SELCO and the Account Custodian
(a "Deficiency Notice"). Written notice shall be given by the Valuation Agent to
each of Debtor, KCCI and SELCO in the manner provided by the preceding sentence
if the ratings of the issuer of the Certificates of Deposit would cause such
issuer to be no longer an Acceptable CD Provider.
(ii) The Debtor shall promptly, but in any event with five (5)
Business Days after receipt of a Deficiency Notice (facsimile confirmation
receipt by the Valuation Agent being deemed receipt of notice by the Debtor,
KCCI, SELCO and the Account Custodian), wire transfer additional Account Funds
in United States dollars to the Collateral Account in an amount equal to the
Deficiency. The Debtor's obligations to deposit such Account Funds in the
Collateral Account is hereinafter referred to as the "Collateral Requirement."
The Valuation Agent agrees to promptly confirm with the Account Custodian the
performance by the Debtor of its obligation to satisfy the Collateral
Requirement by the required date and the Account Custodian agrees to promptly
provide the Valuation Agent with such confirmation or notice of Debtor's failure
to satisfy the Collateral Requirement. If Debtor has failed to satisfy the
Collateral Requirement when required, the Valuation Agent shall notify the
Debtor, KCCI and SELCO of such failure by providing notice in the manner
provided in Section 2(d)(i) hereof.
(iii) If, on any Valuation Date, the aggregate Sales Values of the
Certificates of Deposit plus any Account Funds in the Collateral Account equals
or exceeds the sum of the B Investor Certificate Value plus the SELCO Required
Amount (such difference being referred to herein as the "Excess") and no Default
or Event of Default has occurred and is continuing hereunder, the Valuation
Agent shall provide written notice of such Excess in such form as the as the
Valuation Agent deems appropriate (the "Excess Notice") within two (2) Business
Days after the Valuation Date in the manner provided in Section 2(d)(i) hereof
to the Debtor, KCCI, SELCO and the Account Custodian. The Account Custodian
shall remit to the Debtor (by wire transfer or by transfer to an account
maintained with the Account Custodian) within three (3) Business Days after its
receipt of the Excess Notice (facsimile confirmation receipt by the Valuation
Agent being deemed receipt of notice by Debtor, KCCI, SELCO and the Account
Custodian) funds in the Collateral Account equal to the Excess.
(iv) Provided no "Default" or "Event of Default" under and as defined
in the Lease has occurred and is continuing, interest on the SELCO Certificate
of Deposit which is paid by the issuer thereof and received by the Custodian or
any Secured Party shall be paid to the Debtor.
(e) (i) At any time, the Debtor shall have the right to appoint a
successor Valuation Agent to Wilmington Trust Company (or any successor
Valuation Agent), so long as such successor Valuation Agent is approved by KCCI
and SELCO, which approval shall not be unreasonably withheld, delayed or
conditioned. The Debtor shall give the then current Valuation Agent not less
than thirty (30) days' prior written notice of the appointment and approval of a
successor Valuation Agent. At any time, the then current Valuation Agent shall
have the right to resign as Valuation Agent by giving the Debtor, KCCI and SELCO
no less than thirty (30) days' prior written notice of such resignation. Upon
receipt of such notice, Debtor shall appoint a successor Valuation Agent, which
appointment is subject to the approval
-7-
<PAGE>
by KCCI and SELCO, which approval shall not be unreasonably withheld, delayed or
conditioned. Upon the appointment (and approval thereof) of a successor
Valuation Agent, Debtor shall notify the resigning Valuation Agent and the
Account Custodian of the identity of the successor Valuation Agent and the date
upon which the appointment of such successor becomes effective. Upon the
effectiveness of such appointment, the successor Valuation Agent shall succeed
to the rights, powers and duties of the Valuation Agent being removed or
resigning, and the term "Valuation Agent" shall mean the successor Valuation
Agent, and the rights, powers and duties of the former Valuation Agent shall be
terminated without any other act or deed on the part of such Valuation Agent or
any parties to this Agreement.
(ii) Notwithstanding anything herein to the contrary, the Valuation
Agent shall have no duties, obligations or responsibilities except as expressly
set forth in this Agreement. Except to the extent expressly set forth herein,
the Valuation Agent shall have no fiduciary duty, obligation or responsibility
in respect of any party hereto or any indirect beneficiary of this Agreement or
the Collateral and shall enjoy all of the rights, protections and benefits
afforded to it under the Administration Agreement.
(iii) The Debtor agrees to pay the Valuation Agent its fees which are
payable pursuant to the terms of the Fee Agreement.
3. Establishment and Maintenance of the Collateral Accounts Upon Delivery
----------------------------------------------------------------------
of Other Collateral.
- -------------------
(a) The Account Custodian shall establish a trust account at its branch
located at 135 South LaSalle Street, Chicago, Illinois 60603, in the name of
Debtor for the benefit of KCCI and SELCO. All Account Funds shall be invested
by the Account Custodian in the Account Custodian's Rembrandt Treasury Money
Market Fund or in any other funds or investment with a rating of "A" or better
which is available through the Account Custodian. Upon the occurrence of any
Event of Default hereunder, KCCI and/or SELCO may provide written notice to the
Account Custodian instructing the Account Custodian to release the Account
Custodian to withdraw and release all Account Funds to KCCI and SELCO. Until
the Obligations are indefeasibly paid in full, the Debtor shall have no right to
make withdrawals from the Collateral Account or to otherwise exercise any
control with respect to any property from time to time on deposit in or credited
to the Collateral Account. The Account Custodian agrees to respond to
reasonable inquiries no more frequently than once every two weeks of the Debtor,
the Owner, KCCI, SELCO and the Valuation Agent as to the balance of the
Collateral Account (provided, however, that upon receipt of a notice of an Event
of Default hereunder, the Account Custodian shall inform Owner and KCCI of the
then current balance in the Collateral Account). The Debtor agrees that the
Collateral Account shall be a segregated account, maintained for the exclusive
benefit of and subject to the exclusive dominion and control of KCCI and SELCO.
(b) The Debtor agrees that any and all principal which is not reinvested
in other Securities, stock dividends, instruments, substitutions and exchanges
made in respect of any Collateral shall be deposited to the Collateral Account.
-8-
<PAGE>
(c) The Debtor shall cause any and all interest, cash dividends, cash,
profits, premiums and distributions made in respect of any Collateral
(collectively, the "Income") to be deposited into the Collateral Account.
(d) Except as otherwise specifically provided in this Agreement, no amount
(including accrued interest) held in the Collateral Account or any other account
maintained by the Account Custodian shall be paid or released to or for the
account of, or withdrawn by or for the account of, the Debtor.
(e) The Debtor hereby appoints the Account Custodian the Debtor's
attorney-in-fact, with full authority in the place and stead of the Debtor and
in the name of the Debtor or otherwise, from time to time upon the occurrence of
any Event of Default or upon the failure of the Debtor to comply with the
Collateral Requirement in accordance with the terms hereof, to take action and
to execute any instrument as directed by KCCI or SELCO to accomplish the
purposes of this Agreement with respect to the Account Funds, including, without
limitation, (i) to ask, demand, sue for, recover, compromise, receive and give
acquaintance and receipts for moneys due and to become due under or in respect
of the Account Funds; (ii) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper, in respect of any Account Funds, and
(iii) to file any claims or take any other action or institute any proceedings
as directed by KCCI and/or SELCO for the collection of any Account Funds or
otherwise to enforce the rights of the Account Custodian with respect to the
Account Funds. Debtor acknowledges and agrees that this power of attorney is
irrevocable and coupled with an interest.
(f) KCCI and SELCO hereby appoint the Account Custodian as their agent for
retaining physical possession of the Account Funds in accordance with the terms
of this Agreement. All Account Funds shall be segregated from all other
property, including, without limitation, that of the Debtor, Owner, KCCI and
SELCO.
(g) If the Debtor fails to perform any agreement contained herein with
respect to the Account Funds, the Account Custodian may itself perform, or cause
to be performed, such agreement, and the expenses incurred by the Account
Custodian in connection therewith shall be payable by Debtor on demand of the
Account Custodian.
(h) The powers conferred on the Account Custodian hereunder are solely to
protect the interests of KCCI and SELCO in the Account Funds, and shall not
impose any duty on it to exercise any such powers. Except for the reasonable
care of such Account Funds in its possession by the Account Custodian and the
accounting by the Account Custodian for moneys actually received by it
hereunder, the Account Custodian shall not have any responsibility for taking
any necessary steps to preserve rights against prior parties or any other rights
pertaining to Account Funds. Notwithstanding anything herein to the contrary,
the Account Custodian shall have no duties, obligations or responsibilities
except as expressly set forth in this Agreement, and, except as expressly set
forth in this Agreement, the Account Custodian shall have no fiduciary duty,
obligation or responsibility in respect of any party hereto or any indirect
beneficiary of this Agreement or the Account Funds.
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<PAGE>
(i) The Account Custodian is required to exercise reasonable care in the
custody and preservation of any of the Account Funds in its possession;
provided, however, the Account Custodian shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Account Funds, if
it takes such action for that purpose as the Debtor reasonably requests in
writing provided that no Event of Default shall have occurred and be continuing,
but the failure (whether intentional or otherwise) of the Account Custodian to
comply with any such request at any time shall not in itself be deemed a failure
to have exercised reasonable care but shall be used as a factor in determining
whether the Account Custodian shall have used reasonable care. The Account
Custodian agrees to exercise the same degree of care as customarily exercised by
the Account Custodian generally when acting in such capacity for similar
property in exercising its duties hereunder.
(j) At any time, the Debtor shall have the right to appoint a successor
Account Custodian to LaSalle National Bank (or any successor Account Custodian),
so long as such successor Account Custodian is approved by KCCI and SELCO, which
approval shall not be unreasonably withheld, delayed or conditioned. The Debtor
shall give the then current Account Custodian not less than thirty (30) days'
prior written notice of the appointment and approval of a successor Account
Custodian. At any time, the then current Account Custodian shall have the right
to resign as Account Custodian by giving the Debtor, KCCI and SELCO no less than
thirty (30) days' prior written notice of such resignation. Upon receipt of such
notice, Debtor shall appoint a successor Account Custodian, which appointment is
subject to the approval by KCCI and SELCO, which approval shall not be
unreasonably withheld, delayed or conditioned. Upon the appointment (and
approval thereof) of a successor Account Custodian, Debtor shall notify the
resigning Account Custodian and the Valuation Agent of the identity of the
successor Account Custodian and the date upon which the appointment of such
successor becomes effective. Upon the effectiveness of such appointment, the
successor Account Custodian shall succeed to the rights, powers and duties of
the Account Custodian being removed or resigning, and the term "Account
Custodian" shall mean the successor Account Custodian, and the rights, powers
and duties of the former Account Custodian shall be terminated without any other
act or deed on the part of such Account Custodian or any parties to this
Agreement. Debtor agrees to provide (at Debtor's expense) KCCI and SELCO any
additional financing statements, certificates, documents or opinions of counsel
reasonably requested by KCCI or SELCO to assure KCCI and SELCO that such parties
continue to hold a valid first lien and security interest in the Collateral
Account and the Account Funds prior to effectiveness of the appointment of the
successor Account Custodian.
(k) The Debtor agrees to pay the Account Custodian a per annum fee of
$2,500 payable in advance commencing on the date of the execution and delivery
of this Agreement.
4. Delivery of the Collateral; Perfection Procedures.
-------------------------------------------------
(a) Each item of Collateral which is a Security or a Cash Equivalent shall
consist of one of the following types of security or instrument:
(i) a Negotiable Instrument;
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<PAGE>
(ii) a Certificated Security (including bonds);
(iii) a Book-Entry Government Security;
(iv) a Clearing Corporation Security; or
(v) an Uncertificated Security (other than Book Entry
Government Securities).
(b) Each Negotiable Instrument (which is also not a Certificated Security)
shall be physically delivered to the Custodian or its designee. If the
Negotiable Instrument is payable to order, it shall be endorsed (which
endorsement may not be a separate document) in blank or to the order of KCCI and
SELCO, or their nominee. The delivery and perfection procedure with respect to
any Negotiable Instrument which is also a Certificated Security shall be
governed by paragraph (c) below.
(c) Each Certificated Security (other than a Clearing Corporation
Security) shall be physically delivered to the Custodian or, at KCCI's election,
deposited into the Collateral Account. If the Certificated Security is in bearer
form, such Certificated Security shall be endorsed in blank or to the name of
KCCI, SELCO or their designee. If the Certificated Security is in registered
form, such Certificated Security shall be accompanied by duly executed undated
instruments of transfer or assignment in blank or shall be registered in the
name of KCCI and SELCO or their nominee, all in form and substance satisfactory
to KCCI and SELCO. Upon an occurrence of a Default or an Event of Default which
has occurred and is continuing, KCCI and SELCO may at any time effect the
transfer of any Certificated Securities into the name of KCCI and SELCO. In
addition, the KCCI and SELCO shall have the right at any time to exchange
Certificated Securities for Certificated Securities of smaller or larger
denomination.
(d) Each Book-Entry Government Security shall be transferred to KCCI and
SELCO by the transferor thereof to the KCCI and SELCO (or their nominee) on
their books and records and having the same held by the Custodian in a
segregated account.
(e) Each Clearing Corporation Security shall be transferred to KCCI and
SELCO by the making of appropriate entries on the books of the Clearing
Corporation reducing the account at such Clearing Corporation of the transferor
of such security, as the case may be, and increasing KCCI's and/or SELCO's
account maintained with such Clearing Corporation by the amount of such Clearing
Corporation Security to be transferred to KCCI and SELCO and held by the
Custodian in a segregated account.
(f) Each Uncertificated Security (other than any Book-Entry Government
Security) shall be transferred to KCCI and SELCO.
(g) Each time an Uncertificated Security is to be transferred to KCCI and
SELCO as Collateral, at the sole discretion of KCCI and SELCO, the Debtor shall
(i) be required to obtain an opinion from counsel acceptable to KCCI or SELCO
that shall contain the following information:
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<PAGE>
(1) a statement of the laws by which the perfection of a
security interest in such Uncertificated Security is
governed;
(2) a statement that such counsel is licensed to practice law
in, or render an opinion on, the laws of the jurisdiction
referred to paragraph (1) above;
(3) a statement of the steps which are the steps required to
create a valid perfected first priority security interest in
favor of KCCI and SELCO in such Uncertificated Security; and
(4) a statement that, if such steps are taken, KCCI and SELCO
shall have a valid perfected first priority security
interest in such Uncertificated Security;
and (ii) comply with the steps described in clause (4) above. Each opinion
required to be obtained by the Debtor hereunder shall be in form and substance
acceptable to KCCI or SELCO and may contain only such exceptions and limitations
as are acceptable to KCCI or SELCO.
(h) Any item of Collateral consisting of a Cash Equivalent (other than
Account Funds required to be delivered to the Account Custodian hereunder) shall
be delivered to the Custodian or any other Person designated by KCCI and SELCO,
and the security interest in such Collateral may be perfected by, any other
procedure which is acceptable to KCCI and SELCO in their sole discretion in lieu
of the procedures set forth above.
5. Representations and Warranties. Debtor represents and warrants to
------------------------------
Owner, KCCI and SELCO as follows:
(a) Debtor is and shall be the owner of the Collateral free and clear of
all pledges, liens, security interests and other encumbrances of every nature
whatsoever (except in favor of the Owner);
(b) Debtor has the full right, power and authority to pledge the
Collateral and to grant the security interest in the Collateral as herein
provided;
(c) the execution, delivery and performance of this Agreement by Debtor
will not conflict with or contravene any contractual provision or judgment,
decree, order, statute, rule or regulation to which the Debtor is subject or by
which it or any of its property is bound;
(d) Debtor shall not suffer or permit any lien or encumbrance to exist on
or with respect to the Collateral except in favor of the Owner, KCCI and SELCO;
(e) this Agreement constitutes the legal, valid and binding obligation of
the Debtor in accordance with the terms hereof and has been duly authorized,
executed and delivered;
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<PAGE>
(f) the Debtor is a duly-organized validly existing entity in good
standing under the laws of the State of Delaware and has all requisite power and
authority to conduct its business and to own its properties as now conducted or
owned;
(g) all of the Collateral is and shall be maintained by Debtor with the
Custodian and/or the Account Custodian; and
(h) None of the Collateral constitutes or will constitute "margin stock"
as such term is defined in Regulation U of the Board of Governors of the Federal
Reserve System.
6. Events Of Default And Remedies.
------------------------------
6.1. Events of Default. The occurrence or existence of any of the following
-----------------
shall constitute an Event of Default hereunder: (i) Debtor's default in the due
performance or observance of any covenant, condition or provision to be
performed or observed by it hereunder or (ii) the occurrence of any Event of
Default under (and as defined in) the Lease.
6.2. Remedies.
--------
(a) At any time an Event of Default exists or has occurred and is
continuing, KCCI and SELCO (as assignee of Owner) shall have all rights and
remedies provided in this Agreement, the other Transaction Documents, the UCC
and other applicable law, all of which rights and remedies may be exercised
without notice to or consent by Debtor or any guarantor or other indemnitor,
except as such notice or consent is expressly provided for hereunder or required
by applicable law. All rights, remedies and powers granted to Owner, KCCI and
SELCO hereunder, under any of the other Transaction Documents, the UCC or other
applicable law, are cumulative, not exclusive and enforceable, in KCCI's and
SELCO's discretion, alternatively, successively, or concurrently on any one or
more occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
Debtor of this Agreement or any of the other Transaction Documents. Nothing
herein shall affect or impair Owner's rights to proceed after an Event of
Default against the Debtor or any guarantor or indemnitor under the Lease or the
other Transaction Documents regardless of the exercise or nonexercise of any
rights in favor of KCCI and/or SELCO.
(b) KCCI and SELCO shall each have the right to (i) notify any securities
intermediary or depository institution to transfer any Collateral into the name
of KCCI and/or SELCO, or their nominee, (ii) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, and (iii) sell,
redeem or otherwise dispose of any and all Collateral (including, without
limitation, entering into contracts with respect thereto, public or private
sales at any exchange, broker's board, at any office of Owner or elsewhere) at
such prices or terms as either KCCI and SELCO may deem reasonable, for cash,
upon credit or for future delivery, with KCCI and SELCO each having the right to
purchase the whole or any part of the Collateral at any such public sale, all of
the foregoing being free from any right or equity of redemption of Debtor, which
right or equity of redemption is hereby expressly waived and released by Debtor.
If any of the Collateral is sold by KCCI and/or SELCO upon credit terms or for
future delivery, amounts due and owing from the Debtor shall not be reduced as a
result thereof until payment therefor is
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<PAGE>
finally collected by KCCI and SELCO. KCCI and/or SELCO shall give five (5) days'
prior notice to Debtor designating the time and place of any public sale or the
time after which any private sale or other intended disposition of Collateral is
to be made, and such notice shall be deemed to be reasonable notice thereof and
Debtor waives any other notice. In the event KCCI and/or SELCO institutes an
action to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Debtor waives the posting of any bond which might otherwise
be required.
(c) KCCI and/or SELCO shall apply the cash proceeds of Collateral actually
received by either of them from any sale, redemption or other disposition of the
Collateral to payment of the obligations represented by the B Investor Loan and
the SELCO Contribution, together with any other amounts payable to KCCI and/or
SELCO under the terms of the Lease, the Participation Agreement and the other
Transaction Documents, in whole or in part and in such order as KCCI and/or
SELCO may elect, whether or not then due. Debtor shall remain liable to Owner
(and to the extent that the B Investor Loan and SELCO Contribution are not fully
repaid, Owner shall remain liable to KCCI and SELCO) for the payment of any Base
Rental, Additional Rental, Termination Value or Purchase Price or End of Term
Adjustment as provided under the terms of the Lease (after giving full credit to
the net proceeds realized on the sale, redemption or other disposition of the
Collateral) and all costs and expenses of collection or enforcement, including
attorneys' fees and legal expenses.
7. Power of Attorney. Debtor hereby irrevocably designates and appoints
-----------------
KCCI and SELCO (and all persons designated by either KCCI or SELCO) as Debtor's
true and lawful attorney-in-fact, and authorizes KCCI and SELCO, in Debtor's or
KCCI's and/or SELCO's name, to: (a) at any time an Event of Default or event
which with notice or passage of time or both would constitute an Event of
Default exists or has occurred and is continuing (i) demand and enforce payment
on Collateral or the proceeds of Collateral, (ii) change the name of the holder
of all Collateral to KCCI and/or SELCO or their designee, (iii) exercise all of
Debtor's or Owner's rights and remedies with respect to any Collateral, (iv)
sell or assign any Collateral upon such terms, for such amount and at such time
or times as KCCI and/or SELCO deem advisable, and (v) do all acts and things
which are necessary, in KCCI's and/or SELCO's determination, to fulfill Debtor's
obligations under this Agreement and the other Transaction Documents and (b) at
any time following an Event of Default to (i) endorse Debtor's name upon any
chattel paper, document, instrument, certificate, stock power, or similar
document or agreement relating to any Collateral, (ii) sign Debtor's name on
any verification of Collateral and notices thereof to securities intermediaries
or depository institutions and (iii) execute in Debtor's name and file any UCC
financing statements or amendments thereto. Debtor hereby releases KCCI and
SELCO and their officers, employees and designees from any liabilities arising
from any act or acts under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of KCCI's and/or SELCO's
own gross negligence or willful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
8. Jury Trial Waiver; Other Waivers And Consents; Governing Law.
------------------------------------------------------------
8.1. Governing Law; Choice of Forum; Service of Process; Jury Trial
--------------------------------------------------------------
Waiver.
- ------
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<PAGE>
(a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE. FOR PURPOSES OF THE CREATION
AND PERFECTION OF THE SECURITY INTEREST GRANTED UNDER THIS PLEDGE AGREEMENT WITH
RESPECT TO THE COLLATERAL AND ACCOUNT FUNDS, SUCH MATTERS SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF OHIO AND THE
STATE OF ILLINOIS, RESPECTIVELY.
(b) [omitted]
(c) Debtor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth on the signature
pages hereof and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at KCCI's
and/or SELCO's option, by service upon Debtor in any other manner provided under
the rules of any such courts. Within thirty (30) days after such service, Debtor
shall appear in answer to such process, failing which Debtor shall be deemed in
default and judgment may be entered by KCCI and SELCO against Debtor for the
amount of the claim and other relief requested.
(d) DEBTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF OWNER, KCCI AND/OR SELCO IN RESPECT OF THIS AGREEMENT OR ANY OF
THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE. DEBTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT DEBTOR, OWNER, KCCI OR SELCO MAY FILE AN ORIGINAL COUNTERPART OF
A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
DEBTOR, KCCI AND SELCO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) None of Owner, KCCI nor SELCO shall have any liability to Debtor
(whether in tort, contract, equity or otherwise) for losses suffered by Debtor
in connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non-
appealable judgment or court order binding on Owner, KCCI and SELCO that the
losses were the result of acts or omissions constituting gross negligence or
willful misconduct. In any such litigation, each of the Owner, KCCI and SELCO
shall be entitled to the benefit of the rebuttable presumption that it acted in
good faith and with the exercise of ordinary care in the performance by it of
the terms of this Agreement and the other Transaction Documents.
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<PAGE>
8.2. Waiver of Notices. Debtor hereby expressly waives demand,
-----------------
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the obligations of Debtor under the Transaction Documents or the Collateral,
and any and all other demands and notices of any kind or nature whatsoever with
respect to the obligations of Debtor under the Transaction Documents, the
Collateral and this Agreement, except such as are expressly provided for herein.
No notice to or demand on Debtor which Owner, KCCI and/or SELCO may elect to
give shall entitle Debtor to any other or further notice or demand in the same,
similar or other circumstances.
8.3. Amendments and Waivers. Neither this Agreement nor any provision
----------------------
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Owner, KCCI, SELCO, and, with respect to any provision altering the rights,
obligations and duties of the Valuation Agent, Valuation Agent, and, with
respect to any provision altering the rights, obligations and duties of the
Account Custodian, the Account Custodian. Owner, KCCI and SELCO shall not, by
any act, delay, omission or otherwise be deemed to have expressly or impliedly
waived any of its rights, powers and/or remedies unless such waiver shall be in
writing and signed by an authorized officer of Owner, KCCI and SELCO. Any such
waiver shall be enforceable only to the extent specifically set forth therein. A
waiver by Owner, KCCI or SELCO of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Owner, KCCI or SELCO would otherwise have on any future
occasion, whether similar in kind or otherwise.
8.4. Waiver of Counterclaims. Debtor waives all rights to interpose any
-----------------------
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Collateral or any matter arising therefrom or relating hereto or
thereto.
8.5. Indemnification. Debtor shall indemnify and hold Owner, KCCI, SELCO,
---------------
the Custodian, the Valuation Agent and the Account Custodian, and their
respective directors, agents, employees and counsel (each an "Indemnified Party"
and collectively, the "Indemnified Parties"), harmless from and against any and
all losses, claims, damages, liabilities, reasonable costs or expenses
(collectively, the "Losses") imposed on, incurred by or asserted against any of
them in connection with (i) any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel, (ii) the custody, preservation, use, operation or
sale of, collection from or other realization upon any of the Collateral, and
(iii) the failure of the Debtor to perform or observe any of its obligations
hereunder or under the other Transaction Documents. The Debtor shall not have
any obligation to indemnify an Indemnified Party under this Section 8.5 to the
extent that any Losses resulted from such Indemnified Party's gross negligence
or willful misconduct. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public policy, Debtor shall pay the maximum portion which it is
permitted to pay under applicable law to the Indemnified
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<PAGE>
Parties SELCO, in satisfaction of indemnified matters under this Section. The
foregoing indemnity shall survive the payment of the obligations of Debtor under
the Transaction Documents, the termination of this Agreement and the termination
or non- renewal of the Lease. All of the foregoing costs and expenses shall be
part of the obligations of Debtor under the Transaction Documents and secured by
the Collateral.
9. Miscellaneous.
-------------
9.1. Notices. All notices, requests and demands hereunder shall be in
-------
writing and made to the following:
Owner: The Atrium of San Jose LLC
c/o The Atrium of San Jose, Inc.
c/o Keycorp Leasing
54 State Street
Albany, NY 12207
Attn: John F. State, General Counsel
KCCI: Key Corporate Capital Inc.
127 Public Square
Cleveland, Ohio 44114
Attention: Laurie Muller-Girard
Telecopy: (216) 689-5970
SELCO SELCO Service Corporation
c/o Keycorp Leasing
54 State Street
Albany, New York 12207
Attn: Key Global Lease Administration
Telecopy: (518) 487-4017
Debtor: Brookdale Living Communities of California, Inc.
77 West Wacker Drive, Suite 4400
Chicago, Illinois 60601
Attention: Darryl W. Copeland, Jr. and
Robert J. Rudnik, Esquire
Telecopy: (312) 977-3699
Valuation Agent: Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Custody Department
Telecopy (302) 427-4605
-17-
<PAGE>
Account Custodian LaSalle National Bank
135 S. LaSalle Street, Suite 1825
Chicago, Illinois 60603
Attention Erik Benson, Corporate Trust Officer
Telecopy: (312) 904-2236
or to such other address as either party may designate by written notice to the
other in accordance with this provision, and (b) deemed to have been given or
made: if delivered in person, immediately upon delivery; if by facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
9.2. Partial Invalidity. If any provision of this Agreement is held to be
------------------
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
9.3. Successors. This Agreement and any other document referred to herein
----------
or therein shall be binding upon Debtor and its successors and assigns and inure
to the benefit of and be enforceable by KCCI and SELCO and their respective
successors and assigns, except that Debtor may not assign its rights under this
Agreement, the other Transaction Documents and any other document referred to
herein or therein without the prior written consent of KCCI and SELCO.
9.4. Costs and Expenses. Debtor shall pay to Owner, KCCI and SELCO on
------------------
demand any and all costs and expenses, fees and expenses paid or payable in
connection with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
obligations of Debtor hereunder, KCCI's and SELCO's rights and remedies in the
Collateral including, without limitation, reasonable fees and disbursements of
counsel to Owner, KCCI and SELCO.
9.5. Entire Agreement. This Agreement, the other Transaction Documents,
----------------
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
[SIGNATURE ON FOLLOWING PAGE]
-18-
<PAGE>
[SIGNATURE PAGE FOR PLEDGE AND SECURITY AGREEMENT]
(CASH, CASH EQUIVALENTS AND INVESTMENT PROPERTY)
IN WITNESS WHEREOF, Debtor, Owner, Valuation Agent and Account Custodian
have caused these presents to be duly executed as an instrument under seal as of
the day and year first above written.
DEBTOR: BROOKDALE LIVING COMMUNITIES OF
CALIFORNIA, INC.
By:__________________________________
Name:___________________________
Title:__________________________
OWNER: THE ATRIUM OF SAN JOSE, LLC
By: The Atrium of San Jose, Inc.,
its managing member
By:_____________________________
Title:__________________________
VALUATION AGENT: WILMINGTON TRUST COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
ACCOUNT CUSTODIAN: LASALLE NATIONAL BANK
By:__________________________________
Name:___________________________
Title:__________________________
-19-
<PAGE>
EXHIBIT 10.5
INDEMNITY AND
GUARANTY AGREEMENT
------------------
(DLJ 1996-CF1)
(Loan No. 9690381)
THIS INDEMNITY AND GUARANTY AGREEMENT (this "Agreement"), made as of the
---------
___ day of _______, 1998, jointly and severally by BROOKDALE LIVING COMMUNITIES
OF CALIFORNIA, INC., a Delaware corporation ("Tenant") and BROOKDALE LIVING
------
COMMUNITIES, INC., a Delaware corporation ("Parent"), each of whose address is
------
77 West Wacker Drive, Suite 4800, Chicago Illinois, 60601 Attn: Darryl W.
Copeland, Jr. (Tenant and Parent being referred to herein collectively as
"Indemnitors" and individually as "Indemnitor"), in favor of LASALLE NATIONAL
----------- ----------
BANK, AS TRUSTEE FOR THE REGISTERED HOLDERS OF DLJ MORTGAGE ACCEPTANCE CORP.,
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1996-CF1 ("Lender"), whose
------
address is 135 South LaSalle Street, Suite 1625, Chicago, Illinois 60603, Attn:
Linda Wirfel; DLJ 1996-CF1; Loan No. 9690381.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Atrium Venture, a California limited partnership ("Original
--------
Borrower"), obtained a loan (the "Loan") in the principal amount of Eighteen
- -------- ----
Million Four Hundred Thousand and No/100 Dollars ($18,400,000) from Column
Financial, Inc., a Delaware corporation ("Original Lender"); and
---------------
WHEREAS, the Loan is evidenced by a Promissory Note dated as of January 15,
1996 (the "Note"), executed by Original Borrower and payable to the order of
----
Original Lender in the stated principal amount of Eighteen Million Four Hundred
Thousand and No/100 Dollars ($18,400,000) and is secured by a Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing dated as of January
15, 1996 (the "Deed of Trust") from Original Borrower, as trustor, to a trustee
-------------
for the benefit of Original Lender, as beneficiary, encumbering Original
Borrower's interest in that certain real property situated in the County of
Santa Clara, State of California, as more particularly described on EXHIBIT A
attached hereto and incorporated herein by this reference, together with the
buildings, structures and other improvements now or hereafter located thereon
(said real property, buildings, structures and other improvements being
hereinafter collectively referred to as the "Property") and by other documents
--------
and instruments (the Note, the Deed of Trust, the Assumption Agreement (as
hereinafter defined) and such other documents and instruments evidencing or
securing the Loan, as the same may from time to time be amended, consolidated,
renewed or replaced, being collectively referred to herein as the "Loan
----
Documents"); and
- ---------
1
<PAGE>
WHEREAS, Lender is the current owner and holder of the Loan; and
WHEREAS, The Atrium of San Jose LLC, a Delaware limited liability company
("New Borrower") desires to purchase the Property from Original Borrower and to
------------
assume all of Original Borrower's obligations under the Loan Documents; and
WHEREAS, New Borrower desires to lease the Property to Tenant pursuant to
that certain lease (the "Lease") of even date herewith between Tenant, as Lessee
-----
and New Borrower, as Lessor-Owner; and
WHEREAS, a sale of the Property to and the assumption of the Loan by a
third party and New Borrower entering into the Lease with Tenant without the
consent of Lender is prohibited by the terms of the Deed of Trust thereof; and
WHEREAS, as a condition to Lender's consenting to (i) New Borrower entering
into the Lease with Tenant; and (ii) the sale of the Property to New Borrower
and the assumption of the Loan by New Borrower in accordance with the terms of a
Note and Deed of Trust Assumption Agreement (the "Assumption Agreement") of even
--------------------
date herewith among Original Borrower, New Borrower and Lender (the "Requested
---------
Actions"), Lender has required that Indemnitors indemnify Lender from and
- -------
against and guarantee payment to Lender of those items for which New Borrower is
personally liable and for which Lender has recourse against New Borrower under
the terms of the Loan Documents.
NOW, THEREFORE, to induce Lender to consent to the Requested Actions and in
consideration of the foregoing premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Indemnitors hereby covenant and agree for the benefit of Lender, as follows:
1. INDEMNITY AND GUARANTY. Indemnitors hereby assume liability for, hereby
----------------------
guarantee payment to Lender of, hereby agree to pay, protect, defend and
save Lender harmless from and against, and hereby indemnify Lender from and
against any and all liabilities, obligations, losses, damages, costs and
expenses (including, without limitation, reasonable attorneys' fees),
causes of action, suits, claims, demands and judgments of any nature or
description whatsoever (collectively, "Costs") which may at any time be
-----
imposed upon, incurred by or awarded against Lender as a result of:
2
<PAGE>
(1) Proceeds paid under any insurance policies (or paid as a result of any
other claim or cause of action against any person or entity) by reason
of damage, loss or destruction to all or any portion of the Security
Property (as defined in the Note), to the full extent of such proceeds
not previously delivered to Lender, but which, under the terms of the
Loan Documents, should have been delivered to Lender;
(2) Proceeds or awards resulting from the condemnation or other taking in
lieu of condemnation of all or any portion of the Security Property,
or any of them, to the full extent of such proceeds or awards not
previously delivered to Lender, but which, under the terms of the Loan
Documents, should have been delivered to Lender;
(3) All tenant security deposits or other refundable deposits paid to or
held by New Borrower or Tenant or any other person or entity in
connection with leases or subleases of all or any portion of the
Security Property which are not applied in accordance with the terms
of the applicable lease, sublease or other agreement;
(4) Rent and other payments received by New Borrower or Tenant from
tenants or subtenants under leases of all or any portion of the
Security Property paid more than one month in advance (other than the
SELCO Basic Rent which is to be paid by Tenant on a quarterly basis
pursuant to the terms of the Lease);
(5) Rents, issues, profits and revenues of all or any portion of the
Security Property received from tenants or subtenants by New Borrower
or Tenant and applicable to a period after any notice of default from
Lender under the Loan Documents in the event of any default by New
Borrower thereunder which are not either applied to the ordinary and
necessary expenses (which expenses shall not include any Base or Basic
Rent or Rental (except for the Senior Loan Debt Service Rent) as such
terms are defined and used in the Lease) of owning and operating the
Security Property or paid to Lender;
3
<PAGE>
(6) Damage to all or any portion of the Security Property as a result of
the intentional misconduct or gross negligence of New Borrower or
Tenant or any of their respective principals, officers members or
general partners, or any agent or employee of such persons, or any
removal of all or any portion of the Security Property in violation of
the terms of the Loan Documents, to the full extent of the losses or
damages incurred by Lender on account of such damage or removal;
(7) Failure by New Borrower to pay any valid taxes, assessments,
mechanic's liens, materialmen's liens or other liens which could
create liens on any portion of the Security Property which would be
superior to the lien or security title of the Deed of Trust or the
other Loan Documents, to the full extent of the amount claimed by any
such lien claimant;
(8) All obligations and indemnities of New Borrower under the Loan
Documents relating to hazardous or toxic substances or compliance with
environmental laws and regulations to the full extent of any losses or
damages (including those resulting from diminution in value of any
Security Property) incurred by Lender as a result of the existence of
such hazardous or toxic substances or failure to comply with
environmental laws or regulations; and
(9) Fraud or material misrepresentation by New Borrower or Tenant or any
of their respective principals, members, officers or general partners,
any guarantor, any indemnitor or any agent, employee or other person
authorized or apparently authorized to make statements or
representations on behalf of New Borrower or Tenant, or any member,
principal, or officer of New Borrower or Tenant, or any guarantor or
any indemnitor, to the full extent of any losses, damages and expenses
of Lender on account thereof.
This is a guaranty of payment and performance and not of collection. The
liability of Indemnitors under this Agreement shall be direct and immediate and
not conditional or contingent upon the pursuit of any remedies against New
Borrower or any other person (including, without limitation, other guarantors,
if any), nor against the collateral for the Loan. Indemnitors waive any right
to require that an action be brought against New Borrower or any
4
<PAGE>
other person or to require that resort be had to any collateral for the Loan or
to any balance of any deposit account or credit on the books of Lender in favor
of Borrower or any other person. In the event, on account of the Bankruptcy
Reform Act of 1978, as amended, or any other debtor relief law (whether
statutory, common law, case law or otherwise) of any jurisdiction whatsoever,
now or hereafter in effect, which may be or become applicable, New Borrower
shall be relieved of or fail to incur any debt, obligation or liability as
provided in the Loan Documents, Indemnitors shall nevertheless be fully liable
therefor to the full extent that New Borrower was liable therefor, or that
Indemnitors are liable therefor as set forth in this Indemnity. In the event of
a default under the Loan Documents which is not cured within any applicable
grace or cure period, Lender shall have the right to enforce its rights, powers
and remedies (including, without limitation, foreclosure of all or any portion
of the collateral for the Loan) thereunder or hereunder, in any order, and all
rights, powers and remedies available to Lender in such event shall be non-
exclusive and cumulative of all other rights, powers and remedies provided
thereunder or hereunder or by law or in equity. If the indebtedness and
obligations guaranteed hereby are partially paid or discharged by reason of the
exercise of any of the remedies available to Lender, this Agreement shall
nevertheless remain in full force and effect, and Indemnitors shall remain
liable for all remaining indebtedness and obligations guaranteed hereby, even
though any rights which Indemnitors may have against New Borrower may be
destroyed or diminished by the exercise of any such remedy.
2. INDEMNIFICATION PROCEDURES.
--------------------------
(1) If any action shall be brought against Lender based upon any of the
matters for which Lender is indemnified hereunder, Lender shall notify
Indemnitors in writing thereof and Indemnitors shall promptly assume
the defense thereof, including, without limitation, the employment of
counsel acceptable to Lender and the negotiation of any settlement;
provided, however, that any failure of Lender to notify Indemnitors of
such matter shall not impair or reduce the obligations of Indemnitors
hereunder. Lender shall have the right, at the expense of Indemnitors
(which expense shall be included in Costs), to employ separate counsel
in any such action and to participate in the defense thereof. In the
event Indemnitors shall fail to discharge or undertake to defend
Lender against any claim, loss or liability for which Lender is
indemnified
5
<PAGE>
hereunder, Lender may, at its sole option and election, defend or
settle such claim, loss or liability. The liability of Indemnitors to
Lender hereunder shall be conclusively established by such settlement,
provided such settlement is made in good faith, the amount of such
liability to include both the settlement consideration and the costs
and expenses, including, without limitation, reasonable attorneys'
fees and disbursements, incurred by Lender in effecting such
settlement. In such event, such settlement consideration, costs and
expenses shall be included in Costs and Indemnitors shall pay the same
as hereinafter provided. Lender's good faith in any such settlement
shall be conclusively established if the settlement is made on the
advice of independent legal counsel for Lender.
(2) Indemnitors shall not, without the prior written consent of Lender:
(i) settle or compromise any action, suit, proceeding or claim or
consent to the entry of any judgment in respect of the matters set
forth in paragraphs 1(a) through 1(i), inclusive, hereof that does not
include as an unconditional term thereof the delivery by the claimant
or plaintiff to Lender of a full and complete written release of
Lender (in form, scope and substance satisfactory to Lender in its
sole discretion) from all liability in respect of such action, suit,
proceeding or claim and a dismissal with prejudice of such action,
suit, proceeding or claim; or (ii) settle or compromise any action,
suit, proceeding or claim in respect of the matters set forth in
paragraphs 1(a) through 1(i), inclusive, hereof in any manner that may
adversely affect Lender or obligate Lender to pay any sum or perform
any obligation as determined by Lender in its sole discretion.
(3) All Costs shall be immediately reimbursable to Lender when and as
incurred and, in the event of any litigation, claim or other
proceeding, without any requirement of waiting for the ultimate
outcome of such litigation, claim or other proceeding, and Indemnitors
shall pay to Lender any and all Costs within ten (10) days after
written notice from Lender itemizing the amounts thereof incurred to
the date of such notice. In addition to any other remedy available for
the failure of Indemnitors to periodically pay such Costs, such Costs,
if not paid
6
<PAGE>
within said ten day period, shall bear interest at the Default
Interest Rate (as defined in the Note).
3. REINSTATEMENT OF OBLIGATIONS. If at any time all or any part of any
----------------------------
payment made by Indemnitors or received by Lender from Indemnitors under or
with respect to this Agreement is or must be rescinded or returned for any
reason whatsoever (including, but not limited to, the insolvency,
bankruptcy or reorganization of either Indemnitor), then the obligations of
Indemnitors hereunder shall, to the extent of the payment rescinded or
returned, be deemed to have continued in existence, notwithstanding such
previous payment made by Indemnitors, or receipt of payment by Lender, and
the obligations of Indemnitors hereunder shall continue to be effective or
be reinstated, as the case may be, as to such payment, all as though such
previous payment by Indemnitors had never been made.
4. WAIVERS BY INDEMNITORS. To the extent permitted by law, Indemnitors hereby
----------------------
waive and agree not to assert or take advantage of and shall not be
released or exonerated as a result of (including any release or exoneration
that might occur under California Civil Code Section 2809, 2810, 2819,
2822, 2845, 2848, 2849 or 2850):
(1) Any right to require Lender to proceed against New Borrower or any
other indemnitor or guarantor or any other person or to proceed
against or exhaust any security held by Lender at any time or to
pursue any other remedy in Lender's power or under any other agreement
before proceeding against Indemnitors hereunder;
(2) The defense of the statute of limitations in any action hereunder;
(3) Any defense that may arise by reason of the incapacity, lack of
authority, death or disability of any other person or persons or the
failure of Lender to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of any other
person or persons;
(4) Demand, presentment for payment, notice of nonpayment, protest, notice
of protest and all other notices of any
7
<PAGE>
kind, or the lack of any thereof, including, without limiting the
generality of the foregoing, notice of the existence, creation or
incurring of any new or additional indebtedness or obligation or of
any action or nonaction on the part of New Borrower, Lender, any
endorser or creditor of New Borrower or of either Indemnitor or on the
part of any other person whomsoever under this or any other instrument
in connection with any obligation or evidence of indebtedness held by
Lender;
(5) All rights and defenses arising out of an election of remedies by
Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has
destroyed an Indemnitors' rights of subrogation and reimbursement
against New Borrower by the operation of Section 580d of the
California Code of Civil Procedure or otherwise;
(6) Any right or claim of right to cause a marshaling of the assets of any
Indemnitor;
(7) Any principle or provision of law, statutory or otherwise, which is or
might be in conflict with the terms and provisions of this Agreement;
(8) Any duty on the part of Lender to disclose to Indemnitors any facts
Lender may now or hereafter know about New Borrower or the Security
Property, regardless of whether Lender has reason to believe that any
such facts materially increase the risk beyond that which Indemnitors
intend to assume or has reason to believe that such facts are unknown
to Indemnitors or has a reasonable opportunity to communicate such
facts to Indemnitors, it being understood and agreed that Indemnitors
are fully responsible for being and keeping informed of the financial
condition of New Borrower, of the condition of the Security Property
and of any and all circumstances bearing on the risk that liability
may be incurred by Indemnitors hereunder;
(9) Any lack of notice of disposition or of manner of disposition of any
collateral for the Loan;
8
<PAGE>
(10) Any invalidity, irregularity or unenforceability, in whole or in part,
of any one or more of the Loan Documents;
(11) Any lack of commercial reasonableness in dealing with the collateral
for the Loan;
(12) Any deficiencies in the collateral for the Loan or any deficiency in
the ability of Lender to collect or to obtain performance from any
persons or entities now or hereafter liable for the payment and
performance of any obligation hereby guaranteed;
(13) An assertion or claim that the automatic stay provided by 11 U.S. C.
(S)362 (arising upon the voluntary or involuntary bankruptcy
proceeding of New Borrower) or any other stay provided under any other
debtor relief law (whether statutory, common law, case law or
otherwise) of any jurisdiction whatsoever, now or hereafter in effect,
which may be or become applicable, shall operate or be interpreted to
stay, interdict, condition, reduce or inhibit the ability of Lender to
enforce any of its rights, whether now or hereafter required, which
Lender may have against any Indemnitor or the collateral for the Loan;
(14) Any modifications of the Loan Documents or any obligation of New
Borrower relating to the Loan by operation of law or by action of any
court, whether pursuant to the Bankruptcy Reform Act of 1978, as
amended, or any other debtor relief law (whether statutory, common
law, case law or otherwise) of any jurisdiction whatsoever, now or
hereafter in effect, or otherwise; and
(15) Any action, occurrence, event or matter consented to by Indemnitors
under Section 5(h) hereof, under any other provision hereof, or
otherwise.
5. GENERAL PROVISIONS.
------------------
(1) Fully Recourse. All of the terms and provisions of this Agreement are
--------------
recourse obligations of Indemnitors and not restricted by any
limitation on personal liability.
9
<PAGE>
(2) Unsecured Obligations. Indemnitors hereby acknowledge that Lender's
---------------------
appraisal of the Security Property is such that Lender is not willing
to accept the consequences of the inclusion of Indemnitors' indemnity
set forth herein among the obligations secured by the Deed of Trust
and the other Loan Documents and that Lender would not make the Loan
but for the unsecured personal liability undertaken by Indemnitors
herein.
(3) Survival. This Agreement shall be deemed to be continuing in nature
--------
and shall remain in full force and effect and shall survive the
exercise of any remedy by Lender under the Deed of Trust or any of the
other Loan Documents, including, without limitation, any foreclosure
or deed in lieu thereof, even if, as a part of such remedy, the Loan
is paid or satisfied in full.
(4) No Subrogation; No Recourse Against Lender. Notwithstanding the
------------------------------------------
satisfaction by any Indemnitor of any liability hereunder, Indemnitors
shall not have any right of subrogation (including any rights arising
under California Civil Code Sections 2848 and 2849), contribution,
reimbursement (including any rights arising under California Civil
Code Section 2847), performance (including any rights arising under
California Civil Code Section 2846), or indemnity whatsoever or any
right of recourse to or with respect to New Borrower or the assets or
property of New Borrower or to any collateral for the Loan. In
connection with the foregoing, Indemnitors expressly waive any and all
rights of subrogation of Lender against New Borrower, and Indemnitors
hereby waive any rights to enforce any remedy which Lender may have
against New Borrower and any right to participate in any collateral
for the Loan. The parties included in Indemnitors recognize that,
pursuant to Section 580d of the California Code of Civil Procedure,
Lender's realization through non-judicial foreclosure upon any real
property constituting security for New Borrower's obligations under
the Loan Documents could terminate any right of Lender to recover a
deficiency judgment against New Borrower, thereby terminating
subrogation rights which such parties otherwise might have against New
Borrower. In the absence of an adequate waiver, such a termination of
subrogation rights could create a defense to enforcement of this
Agreement against such parties.
10
<PAGE>
Indemnitors hereby unconditionally and irrevocably waive any such
defense. In addition to and without in any way limiting the foregoing,
Indemnitors hereby subordinate any and all indebtedness of New
Borrower now or hereafter owed to any Indemnitor to all indebtedness
of New Borrower to Lender, and agrees with Lender that Indemnitors
shall not demand or accept any payment of principal or interest from
New Borrower, shall not claim any offset or other reduction of
Indemnitors' obligations hereunder because of any such indebtedness
and shall not take any action to obtain any of the collateral from the
Loan. Further, except in the event of Lender's gross negligence or
willful misconduct, Indemnitors shall not have any right of recourse
against Lender by reason of any action Lender may take or omit to take
under the provisions of this Agreement or under the provisions of any
of the Loan Documents.
(5) Reservation of Rights. Nothing contained in this Agreement shall
---------------------
prevent or in any way diminish or interfere with any rights or
remedies, including, without limitation, the right to contribution,
which Lender may have against New Borrower, Any Indemnitor or any
other party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (codified at Title 42 U.S.C.
(S)9601 et seq.), as it may be amended from time to time, or any other
-- ---
applicable federal, state or local laws, all such rights being hereby
expressly reserved.
(6) Financial Statements. Each Indemnitor hereby agrees, as a material
--------------------
inducement to Lender to grant its consent as contemplated hereby, to
furnish to Lender promptly upon demand by Lender current and dated
financial statements detailing the assets and liabilities of
Indemnitor certified by Indemnitor, in form and substance acceptable
to Lender. Each Indemnitor hereby warrants and represents unto Lender
that any and all balance sheets, net worth statements and other
financial data which have heretofore been given or may hereafter be
given to Lender with respect to said Indemnitor did or will at the
time of such delivery fairly and accurately present the financial
condition of said Indemnitor.
(7) Rights Cumulative; Payments. Lender's rights under this Agreement
---------------------------
shall be in addition to all rights of Lender
11
<PAGE>
under the Note, the Deed of Trust and the other Loan Documents.
(8) No Limitation on Liability. Indemnitors hereby consent and agree that
--------------------------
Lender may at any time and from time to time without further consent
from Indemnitors do any of the following events, and the liability of
Indemnitors under this Agreement shall be unconditional and absolute
and shall in no way be impaired or limited by any of the following
events, whether occurring with or without notice to Indemnitors or
with or without consideration: (i) any extensions of time for
performance required by any of the Loan Documents or extension or
renewal of the Note; (ii) any sale, assignment or foreclosure of the
Note, the Deed of Trust or any of the other Loan Documents or any sale
or transfer of the Security Property; (iii) any change in the
composition of New Borrower, Parent or Tenant, including, without
limitation, the withdrawal or removal of Indemnitors from any current
or future position of ownership, management or control of Borrower,
Tenant or Parent; (iv) the accuracy or inaccuracy of the
representations and warranties made by Indemnitors herein or by New
Borrower or Tenant in any of the Loan Documents or the Assumption
Agreement; (v) the release of New Borrower or of any other person or
entity from performance or observance of any of the agreements,
covenants, terms or conditions contained in any of the Loan Documents
by operation of law, Lender's voluntary act or otherwise; (vi) the
release of Tenant or of any other person or entity from performance or
observance of any of the agreements, covenants, terms or conditions
contained in the Lease by operation of law or otherwise; (vii) the
release, substitution or subordination in whole or in part of any
security for the Loan; (viii) Lender's failure to record the
Assumption Agreement or to file any financing statement (or Lender's
improper recording or filing of the Deed of Trust) or to otherwise
perfect, protect, secure or insure any lien or security interest given
as security for the Loan; (ix) the modification of the terms of any
one or more of the Loan Documents; or (x) the taking or failure to
take any action of any type whatsoever. No such action which Lender
shall take or fail to take in connection with the Loan Documents or
any collateral for the Loan, the Lease, nor any course or
12
<PAGE>
dealing with New Borrower, Tenant, Parent, or any other person, shall
limit, impair or release Indemnitors' obligations hereunder, affect
this Agreement in any way or afford Indemnitors any recourse against
Lender. Nothing contained in this Section shall be construed to
require Lender to take or refrain from taking any action referred to
herein.
(9) Entire Agreement; Amendment; Severability. This Agreement contains
-----------------------------------------
the entire agreement between the parties respecting the matters herein
set forth and supersedes all prior agreements, whether written or
oral, between the parties respecting such matters. Any amendments or
modifications hereto, in order to be effective, shall be in writing
and executed by the parties hereto. A determination that any
provision of this Agreement is unenforceable or invalid shall not
affect the enforceability or validity of any other provision, and any
determination that the application of any provision of this Agreement
to any person or circumstance is illegal or unenforceable shall not
affect the enforceability or validity of such provision as it may
apply to any other persons or circumstances.
(10) Governing Law; Binding Effect; Waiver of Acceptance. This Agreement
---------------------------------------------------
shall be governed by and construed in accordance with the laws of the
State of California, except to the extent that the applicability of
any of such laws may now or hereafter be preempted by Federal law, in
which case such Federal law shall so govern and be controlling. This
Agreement shall bind each Indemnitor and the heirs, personal
representatives, successors and assigns of each Indemnitor and shall
inure to the benefit of Lender and the officers, directors,
shareholders, servicers, agents and employees of Lender and their
respective heirs, successors and assigns. Notwithstanding the
foregoing, Indemnitors shall not assign any of their respective rights
or obligations under this Agreement without the prior written consent
of Lender, which consent may be withheld by Lender in its sole
discretion. Each Indemnitor hereby waives any acceptance of this
Agreement by Lender, and this Agreement shall immediately be binding
upon Indemnitors.
13
<PAGE>
(11) Notice. All notices, demands, requests or other communications to be
------
sent by one party to the other hereunder or required by law shall be
in writing and shall be deemed to have been validly given or served by
delivery of the same in person to the intended addressee, or by
depositing the same with Federal Express or another reputable private
courier service for next business day delivery to the intended
addressee at its address set forth on the first page of this Agreement
or at such other address as may be designated by such party as herein
provided, or by depositing the same in the United States mail, postage
prepaid, registered or certified mail, return receipt requested,
addressed to the intended addressee at its address set forth on the
first page of this Agreement or at such other address as may be
designated by such party as herein provided. All notices, demands and
requests shall be effective upon such personal delivery, or one (1)
business day after being deposited with the private courier service,
or two (2) business days after being deposited in the United States
mail as required above. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was
given as herein required shall be deemed to be receipt of the notice,
demand or request sent. By giving to the other party hereto at least
fifteen (15) days' prior written notice thereof in accordance with the
provisions hereof, the parties hereto shall have the right from time
to time to change their respective addresses and each shall have the
right to specify as its address any other address within the United
States of America.
(12) No Waiver; Time of Essence; Business Day. The failure of any party
----------------------------------------
hereto to enforce any right or remedy hereunder, or to promptly
enforce any such right or remedy, shall not constitute a waiver
thereof nor give rise to any estoppel against such party nor excuse
any of the parties hereto from their respective obligations hereunder.
Any waiver of such right or remedy must be in writing and signed by
the party to be bound. This Agreement is subject to enforcement at
law or in equity, including actions for damages or specific
performance. Time is of the essence hereof. The term "business day"
------------
as used herein shall mean a weekday, Monday through Friday, except a
legal holiday or a day on which banking
14
<PAGE>
institutions in New York, New York are authorized by law to be closed.
(13) Captions for Convenience. The captions and headings of the sections
------------------------
and paragraphs of this Agreement are for convenience of reference only
and shall not be construed in interpreting the provisions hereof.
(14) Attorneys' Fees. In the event it is necessary for Lender to retain
---------------
the services of an attorney or any other consultants in order to
enforce this Agreement, or any portion thereof, Indemnitors agree to
pay to Lender any and all costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred by Lender as a result
thereof and such costs, fees and expenses shall be included in Costs.
(15) Successive Actions. A separate right of action hereunder shall arise
------------------
each time Lender acquires knowledge of any matter indemnified or
guaranteed by Indemnitors under this Agreement. Separate and
successive actions may be brought hereunder to enforce any of the
provisions hereof at any time and from time to time. No action
hereunder shall preclude any subsequent action, and Indemnitors hereby
waive and covenant not to assert any defense in the nature of
splitting of causes of action or merger of judgments.
(16) Reliance. Lender would not grant its consent to the Requested Actions
--------
without this Agreement. Accordingly, Indemnitor intentionally and
unconditionally enters into the covenants and agreements as set forth
above and understands that, in reliance upon and in consideration of
such covenants and agreements, Lender has agreed to give its consent
to the Requested Actions and, as part and parcel thereof, specific
monetary and other obligations have been, are being and shall be
entered into which would not be made or entered into but for such
reliance.
(17) SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
------------------------------------------------
(1) INDEMNITORS, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE
ADVICE OF COMPETENT COUNSEL, (A)
15
<PAGE>
SUBMIT TO PERSONAL JURISDICTION IN THE STATE OF CALIFORNIA OVER
ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR
RELATING TO THIS AGREEMENT, (B) AGREE THAT ANY SUCH ACTION, SUIT
OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION SITTING IN SANTA CLARA COUNTY, CALIFORNIA,
(C) SUBMIT TO THE JURISDICTION OF SUCH COURTS, AND, (D) TO THE
FULLEST EXTENT PERMITTED BY LAW, AGREE THAT NEITHER OF THEM WILL
BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT
NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY
ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM). INDEMNITORS
FURTHER CONSENT AND AGREE TO SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE
INDEMNITORS AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 5(k)
HEREOF, AND CONSENT AND AGREE THAT SUCH SERVICE SHALL CONSTITUTE
IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN
SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN
ANY OTHER MANNER PERMITTED BY LAW).
(2) LENDER AND INDEMNITORS, TO THE FULL EXTENT PERMITTED BY LAW,
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON
THE ADVICE OF COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER
FORGO THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS
AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR
INDEMNITORS, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS,
MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS
AFFILIATED WITH LENDER OR INDEMNITORS, IN EACH OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
(18) Waiver by Indemnitors. Indemnitors covenant and agree that, upon the
---------------------
commencement of a voluntary or involuntary bankruptcy proceeding by or
against New Borrower, Indemnitors shall not seek or cause New Borrower
or any other person or entity to seek a supplemental stay or other
relief, whether injunctive or otherwise, pursuant to 11 U. S. C. (S)
105 or any other provision of the
16
<PAGE>
Bankruptcy Reform Act of 1978, as amended, or any other debtor relief
law, (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or
become applicable, to stay, interdict, condition, reduce or inhibit
the ability of Lender to enforce any rights of Lender against
Indemnitors or the collateral for the Loan by virtue of this Agreement
or otherwise.
(19) Joint and Several Liability. Notwithstanding anything to the contrary
---------------------------
herein, the representations, warranties, covenants and agreements made
by each of Indemnitors herein; and the liability of each of
Indemnitors hereunder, is joint and several.
(20) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be effective only upon delivery and
thereafter shall be deemed an original, and all of which shall be
taken to be one and the same instrument, for the same effect as if all
parties hereto had signed the same signature page. Any signature page
of this Agreement may be detached from any counterpart of this
Agreement without impairing the legal effect of any signatures thereon
and may be attached to another counterpart of this Agreement identical
in form hereto but having attached to it one or more additional
signature pages.
17
<PAGE>
IN WITNESS WHEREOF, Indemnitors have executed this Agreement as of the day
and year first above written.
TENANT:
BROOKDALE LIVING COMMUNITIES OF
CALIFORNIA, INC., a Delaware corporation
By: _________________________________
Name: _________________________________
Title: _________________________________
PARENT:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By: _________________________________
Name: _________________________________
Title: _________________________________
18
<PAGE>
EXHIBIT 10.6
HAZARDOUS SUBSTANCES
INDEMNITY AGREEMENT
-------------------
(DLJ 1996-CF1)
(Loan No. 9690381)
THIS HAZARDOUS SUBSTANCES INDEMNITY AGREEMENT (this "Agreement"), made as
---------
of the ___ day of _____, 1998, jointly and severally by THE ATRIUM OF SAN JOSE
LLC, a Delaware limited liability company ("New Borrower"), whose address is
-----------
4121-A Power Inn Road, Sacramento, California 95826, Attn: Jeffrey A. Hallsten;
BROOKDALE LIVING COMMUNITIES OF CALIFORNIA, INC., a Delaware corporation
("Tenant") and BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation
------
("Parent"), each of whose address is 77 West Wacker Drive, Suite 4800, Chicago
------
Illinois, 60601 Attn: Darryl W. Copeland, Jr. (New Borrower, Tenant and Parent
being referred to herein collectively as "Indemnitors" and individually as
-----------
"Indemnitor"), in favor of LASALLE NATIONAL BANK, AS TRUSTEE FOR THE REGISTERED
----------
HOLDERS OF DLJ MORTGAGE ACCEPTANCE CORP., COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 1996-CF1 ("Lender"), whose address is 135 South LaSalle
------
Street, Suite 1625, Chicago, Illinois 60603, Attn: Linda Wirfel; DLJ 1996-CF1;
Loan No. 9690381.
WITNESSETH:
----------
WHEREAS, Atrium Venture, a California limited partnership ("Original
--------
Borrower"), obtained a loan (the "Loan") in the principal amount of Eighteen
- -------- ----
Million Four Hundred Thousand and No/100 Dollars ($18,400,000) from Column
Financial, Inc., a Delaware corporation ("Original Lender"); and
---------------
WHEREAS, the Loan is evidenced by a Promissory Noted dated as of January
15, 1996 (the "Note"), executed by Original Borrower and payable to the order of
----
Original Lender in the stated principal amount of Eighteen Million Four Hundred
Thousand and No/100 Dollars ($18,400,000) and is secured by a Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing dated as of January
15, 1996 (the "Deed of Trust") from Original Borrower, as trustor, to a trustee
-------------
for the benefit of Original Lender, as beneficiary, encumbering Original
Borrower's interest in that certain real property situated in the County of
Santa Clara, State of California, as more particularly described on EXHIBIT A
attached hereto and incorporated herein by this reference, together with the
buildings, structures and other improvements now or hereafter located thereon
(said real property, buildings, structures and other improvements being
hereinafter collectively referred to as the "Property") and by other documents
--------
and instruments (the Note, the Deed of Trust, the Assumption Agreement (as
hereinafter defined) and such
<PAGE>
other documents and instruments evidencing or securing the Loan, as the same may
from time to time be amended, consolidated, renewed or replaced, being
collectively referred to herein as the "Loan Documents"); and
--------------
WHEREAS, Lender is the current owner and holder of the Loan; and
WHEREAS, New Borrower desires to purchase the Property from Original
Borrower and to assume all of Original Borrower's obligations under the Loan
Documents; and
WHEREAS, New Borrower desires to lease the Property to Tenant pursuant to
that certain lease (the "Lease") of even date herewith between Tenant, as Lessee
-----
and New Borrower, as Lessor-Owner; and
WHEREAS, a sale of the Property to and the assumption of the Loan by a
third party and New Borrower's entering into the Lease with Tenant without the
consent of the holder of the Deed of Trust is prohibited by the terms thereof;
and
WHEREAS, as a condition to Lender consenting to (i) the transfer of the
Property to and the assumption of the Loan by New Borrower in accordance with
the terms of a Note and Deed of Trust Assumption Agreement of even date herewith
among Original Borrower, New Borrower and Lender (the "Assumption Agreement")
--------------------
and (ii) New Borrower entering into the Lease with Tenant (collectively, the
"Requested Actions"), Lender has required that Indemnitors indemnify Lender with
-----------------
respect to hazardous wastes on, in, under or affecting the Property as herein
set forth.
NOW, THEREFORE, to induce Lender to consent to the Requested Actions and in
consideration of the foregoing premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Indemnitors hereby covenant and agree for the benefit of Lender, as follows;
1. INDEMNITY. Indemnitors hereby assume liability for, and hereby agree to
---------
pay, protect, defend (at trial and appellate levels) with attorneys,
consultants and experts acceptable to Lender, and save Lender harmless from
and against, and hereby indemnify Lender from and against any and all
liens, damages, losses, liabilities, obligations, settlement payments,
penalties, assessments, citations, directives, claims, litigation, demands,
defenses, judgments, suits, proceedings, costs, disbursements and expenses
of any kind or of any nature whatsoever (including, without limitation,
reasonable
<PAGE>
attorneys', consultants' and experts' fees and disbursements actually incurred
in investigating, defending, settling or prosecuting any claim, litigation or
proceeding) (collectively "Costs") which may at any time be imposed upon,
-----
incurred by or asserted or awarded against Lender or the Property, and arising
directly or indirectly from or out of: (i) the violation of any local, state or
federal law, rule or regulation pertaining to environmental regulation,
contamination or clean-up (collectively, "Environmental Laws"), including,
------------------
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. (S) 9601 et seq. and 40 CFR (S) 302.1 et seq.),
-- --- -- ---
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. (S) 6901 et seq.),
-- ---
The Federal Water Pollution Control Act (33 U.S.C. (S) 1251 et seq. and 40 CFR
-- ---
(S) 116 et seq. and the Hazardous Materials Transportation Act (49 U.S.C (S)
-- ---
1801 et seq.), and the regulations promulgated pursuant to said laws, all as
-- ---
amended, relating to or affecting the Property, whether or not caused by or
within the control of Indemnitors; (ii) the presence, release or threat of
release of any hazardous, toxic or harmful substances, wastes, materials,
pollutants or contaminants (including, without limitation, asbestos,
polychlorinated biphenyls, petroleum products, flammable explosives, radioactive
materials, infectious substances or raw materials which include hazardous
constituents) or any other substances or materials which are included under or
regulated by Environmental Laws (collectively, "Hazardous Substances"), on, in,
--------------------
under or affecting all or any portion of the Property or any surrounding areas,
regardless of whether or not caused by or within the control of Indemnitors;
(iii) the failure by Indemnitors to comply fully with the terms and conditions
of this Agreement; (iv) the breach of any representation or warranty contained
in this Agreement; or (v) the enforcement of this Agreement, including, without
limitation, the cost of assessment, containment and/or removal of any and all
Hazardous Substances from all or any portion of the Property or any surrounding
areas, the cost of any actions taken in response to the presence, release or
threat of release of any Hazardous Substances on, in, under or affecting any
portion of the Property or any surrounding areas to prevent or minimize such
release or threat of release so that it does not migrate or otherwise cause or
threaten danger to present or future public health, safety, welfare or the
3
<PAGE>
environment, and costs incurred to comply with the Environmental Laws in
connection with all or any portion of the Property or any surrounding
areas. "Costs" as used in this Agreement shall also include any diminution
-----
in the value of the security afforded by the Property or any future
reduction of the sales price of the Property by reason of any matter set
forth in this Paragraph 1. The foregoing indemnity shall specifically not
include any such costs relating to Hazardous Substances which are initially
placed on, in or under the Property (i) after foreclosure or other taking
of title to the Property or (ii) by Lender or anyone claiming by, through
or under Lender.
2. REPRESENTATIONS REGARDING HAZARDOUS SUBSTANCES: Indemnitors hereby
----------------------------------------------
represent and warrant to and covenant and agree with Lender as follows:
(1) To the best of Indemnitors' knowledge, information and belief,
the Property is not in direct or indirect violation of any Environmental Law;
(2) No Hazardous Substances are located on or have been handled,
generated, stored, processed or disposed of on, or released or discharged from,
the Property (including underground contamination) except for those substances
used by New Borrower in the ordinary course of its business and in compliance
with all Environmental Laws. Indemnitors and Lender have been advised that
certain underground storage tanks previously may have been located on the
Property, and have been removed, with closure of certain issues respecting the
Property having been granted by the California Regional Water Quality Control
Board on July 17, 1985, and by the Santa Clara Valley Water District on February
5, 1992. To the best of Indemnitors' knowledge, there is no current or pending
issue with respect to the presence of any Hazardous Substances at the Property;
(3) The Property is not subject to any private or governmental lien
or judicial or administrative notice or action relating to Hazardous Substances;
(4) There are no existing or closed underground storage tanks or
other underground storage receptacles for Hazardous Substances on the Property,
except those three underground storage
4
<PAGE>
tanks removed from the Property in 1985 as described in that certain Phase I
Environmental Site Assessment for the Property prepared by EMG dated November 6,
1995;
(5) None of Indemnitors has received any notice of, and to the best
of Indemnitors' knowledge and belief, there exists no investigation, action,
proceeding or claim by any agency, authority or unit of government or by any
third party which could result in any liability, penalty, sanction or judgment
under any Environmental Laws with respect to any condition, use or operation of
the Property nor do Indemnitors know of any basis for such a claim; and
(6) Indemnitors have received no notice that, and to the best of
Indemnitors' knowledge and belief, there has been no claim by any party that,
any use, operation or condition of the Property has caused any nuisance or any
other liability or adverse condition on any other property nor do Indemnitors
know of any basis for such a claim.
3. COVENANTS OF INDEMNITORS.
------------------------
(1) Indemnitors shall keep or cause the Property to be kept free from
Hazardous Substances (except those substances used by New Borrower or Tenant in
the ordinary course of its business and in compliance with all Environmental
Laws) and in compliance with all Environmental Laws, shall not install or use
any underground storage tanks, shall expressly prohibit the use, generation,
handling, storage, production, processing and disposal of Hazardous Substances
by all tenants or subtenants of space in the Improvements, and, without limiting
the generality of the foregoing, during the term of this Agreement, shall not
install in the Improvements or permit to, be installed in the Improvements
asbestos or any substance containing asbestos.
(2) Indemnitors shall immediately notify Lender should Indemnitors,
or any of them, become aware of (i) any Hazardous Substances, or other potential
environmental problem or liability, with respect to the Property; (ii) any lien,
action or notice affecting the Property, New Borrower or Tenant resulting from
any violation or alleged violation of the Environmental Law; (iii) the
institution of any investigation, inquiry or proceeding concerning New Borrower,
Tenant or the Property pursuant to any Environmental
5
<PAGE>
Law or otherwise relating to Hazardous Substances; or (iv) the discovery of any
occurrence, condition or state of facts which would render any representation or
warranty contained in this Agreement incorrect in any respect if made at the
time of such discovery. Indemnitors shall, promptly and when and as required and
regardless of the source of the contamination, at their own expense, take all
actions as shall be necessary or advisable for the clean-up of any and all
portions of the Property or other affected property, including, without
limitation, all investigative, monitoring, removal, containment and remedial
actions in accordance with all applicable Environmental Laws (and in all events
in a manner satisfactory to Lender), and shall further pay or cause to be paid,
at no expense to Lender, all clean-up, administrative and enforcement costs of
applicable governmental agencies which may be asserted against the Property. In
the event Indemnitors fail to do so, Lender may cause the Property or other
affected property to be freed from any Hazardous Substances or otherwise brought
into conformance with Environmental Laws and any cost incurred in connection
therewith shall be included in Costs and shall be paid by Indemnitors in
accordance with the terms of Paragraph 4(c) hereof. In furtherance of the
foregoing, Indemnitors hereby grant to Lender access to the Property and an
irrevocable license to remove any items deemed by Lender to be Hazardous
Substances and to do all things Lender shall deem necessary to bring the
Property into conformance with Environmental Laws.
(3) Upon the request of Lender, at any time and from time to time
after the occurrence of a default under this Agreement or the Loan Documents or
at such other time as Lender has reasonable grounds to believe that Hazardous
Substances are or have been released, stored or disposed of on or around the
Property or that the Property may be in violation of the Environmental Laws,
Indemnitors shall provide, at Indemnitors' sole expense, an inspection or audit
of the Property prepared by a hydrogeologist or environmental engineer or other
appropriate consultant reasonably approved by Lender indicating the presence or
absence of Hazardous Substances on the Property or an inspection or audit of the
improvements located on the Property prepared by an engineering or consulting
firm approved by Lender indicating the presence or absence of friable asbestos
or substances containing asbestos on the Property. If Indemnitors fail to
provide such inspection or audit within thirty (30) days after such request,
Lender may order
6
<PAGE>
the same, and Indemnitors hereby grant to Lender access to the Property and an
irrevocable license to undertake such inspection or audit. The cost of such
inspection or audit shall be included in Costs and shall be paid by Indemnitors
in accordance with the terms of Paragraph 4(c) hereof.
4. INDEMNIFICATION PROCEDURES.
--------------------------
(1) If any action shall be brought against Lender based upon any of
the matters for which Lender is indemnified hereunder, Lender shall notify
Indemnitors in writing thereof and Indemnitors shall promptly assume the defense
thereof, including, without limitation, the employment of counsel acceptable to
Lender and the negotiation of any settlement; provided, however, that any
failure of Lender to notify Indemnitors of such matter shall not impair or
reduce the obligations of Indemnitors hereunder. Lender shall have the right, at
the expense of Indemnitors (which expense shall be included in Costs), to employ
separate counsel in any such action and to participate in the defense thereof.
In the event Indemnitors shall fail to discharge or undertake to defend Lender
against any claim, loss or liability for which Lender is indemnified hereunder,
Lender may, at its sole option and election, defend or settle such claim, loss
or liability. The liability of Indemnitors to Lenders hereunder shall be
conclusively established by such settlement, provided such settlement is made in
good faith, the amount of such liability to include both the settlement
consideration and the costs and expenses, including, without limitation,
attorneys' fees and disbursements, incurred by Lender in effecting such
settlement. In such event, such settlement consideration, costs and expenses
shall be included in Costs and Indemnitors shall pay the same as hereinafter
provided. Lender's good faith in any such settlement shall be conclusively
established if the settlement is made on the advice of independent legal counsel
for Lender.
(2) Indemnitors shall not, without the prior written consent of
Lender: (i) settle or compromise any action, suit, proceeding or claim or
consent to the entry of any judgment in respect of the indemnified matters under
paragraph 1 hereof or elsewhere in this Agreement that does not include as an
unconditional term thereof the delivery by the claimant or plaintiff to Lender
of a full and complete written release of Lender (in form, scope and substance
satisfactory to Lender in its
7
<PAGE>
sole discretion) from all liability in respect of such action, suit, proceeding
or claim and a dismissal with prejudice of such action, suit, proceeding or
claim; or (ii) settle or compromise any action, suit, proceeding or claim in
respect of the indemnified matters under paragraph 1 hereof or elsewhere in this
Agreement in any manner that may adversely affect Lender or obligate Lender to
pay any sum or perform any obligation as determined by Lender in its sole
discretion.
(3) All Costs shall be immediately reimbursable to Lender when and as
incurred and, in the event of any litigation, claim or other proceeding, without
any requirement of waiting for the ultimate outcome of such litigation, claim or
other proceeding, and Indemnitors shall pay to Lender any and all Costs within
ten (10) days after written notice from Lender itemizing the amounts thereof
incurred to the date of such notice. In addition to any other remedy available
for the failure of Indemnitors to periodically pay such Costs, such Costs, if
not paid within said ten-day period, shall bear interest at the Default Interest
Rate (as defined in the Note).
5. REINSTATEMENT OF OBLIGATIONS. If at any time all or any part of any payment
----------------------------
made by Indemnitors or received by Lender from Indemnitors under or with
respect to this Agreement is or must be rescinded or returned for any
reason whatsoever (including, but not limited to, the insolvency,
bankruptcy or reorganization of any Indemnitor), then the obligations of
Indemnitors hereunder shall, to the extent of the payment rescinded or
returned, be deemed to have continued in existence, notwithstanding such
previous payment made by Indemnitors, or receipt of payment by Lender, and
the obligations of Indemnitors hereunder shall continue to be effective or
be reinstated, as the case may be, as to such payment, all as though such
previous payment by Indemnitors had never been made.
6. WAIVERS BY INDEMNITORS. To the extent permitted by law, Indemnitors hereby
----------------------
waive and agree not to assert or take advantage of and shall not be
released or exonerated as a result of (including any release or exoneration
that might occur under California Civil Code Section 2809, 2810, 2819,
2822, 2845, 2848, 2849 or 2850):
8
<PAGE>
(1) Any right to require Lender to proceed against New Borrower or
any other indemnitor or guarantor or any other person or to proceed against or
exhaust any security held by Lender at any time or to pursue any other remedy
in Lender's power or under any other agreement before proceeding against
Indemnitors hereunder;
(2) The defense of the statute of limitations in any action
hereunder;
(3) Any defense that may arise by reason of the incapacity, lack of
authority, death or disability of any other person or persons or the failure of
Lender to file or enforce a claim against the estate (in administration,
bankruptcy or any other proceeding) of any other person or persons;
(4) Demand, presentment for payment, notice of nonpayment, protest,
notice of protest and all other notices of any kind, or the lack of any thereof,
including, without limiting the generality of the foregoing, notice of the
existence, creation or incurring of any new or additional indebtedness or
obligation or of any action or nonaction on the part of Lender, any endorser or
creditor of either Indemnitor or any other person whomsoever under this or any
other instrument in connection with any obligation or evidence of indebtedness
held by Lender;
(5) All rights and defenses arising out of an election of remedies
by Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
Indemnitors' rights of subrogation and reimbursement against Borrower by the
operation of Section 580d of the California Code of Civil Procedure or
otherwise;
(6) Any right or claim of right to cause a marshaling of the assets
of any Indemnitor;
(7) Any principle or provision of law, statutory or otherwise, which
is or might be in conflict with the terms and provisions of this Agreement;
(8) Any duty on the part of Lender to disclose to Indemnitors any
facts Lender may now or hereafter know about the Property, regardless of whether
Lender has reason to believe that any such facts materially increase the risk
beyond that which
9
<PAGE>
Indemnitors intend to assume or has reason to believe that such facts are
unknown to Indemnitors or has a reasonable opportunity to communicate such facts
to Indemnitors, it being understood and agreed that Indemnitors are fully
responsible for being and keeping informed of the condition of the Property and
of any and all circumstances bearing on the risk that liability may be incurred
by Indemnitors hereunder;
(9) Any lack of notice of disposition or of manner of disposition of
any collateral for the Loan;
(10) Any invalidity, irregularity or unenforceability, in whole or in
part, of any one or more of the Loan Documents;
(11) Any lack of commercial reasonableness in dealing with the
collateral for the Loan;
(12) Any deficiencies in the collateral for the Loan or any deficiency
in the ability of Lender to collect or to obtain performance from any persons or
entities now or hereafter liable for the payment and performance of any
obligation hereby guaranteed;
(13) An assertion or claim that the automatic stay provided by 11
U.S.C. (S)362 (arising upon the voluntary or involuntary bankruptcy proceeding
of New Borrower) or any other stay provided under any other debtor relief law
(whether statutory, common law, case law or otherwise) or any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable, shall
operate or be interpreted to stay, interdict, condition, reduce or inhibit the
ability of Lender to enforce any of its rights, whether now or hereafter
required, which Lender may have against any Indemnitor or the collateral for the
Loan;
(14) Any modifications of the Loan Documents or any obligation of New
Borrower relating to the Loan by operation of law or by action of any court,
whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other
debtor relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, or otherwise; and
10
<PAGE>
(15) Any action, occurrence, event or matter consented to by
Indemnitors under Section 7(h) hereof, under any other provision hereof, or
otherwise.
7. GENERAL PROVISIONS.
------------------
(1) Fully Recourse. All of the terms and provisions of this Agreement
--------------
are recourse obligations of Indemnitors: and not restricted by any limitation on
personal liability.
(2) Unsecured Obligations. Indemnitors hereby acknowledge that
---------------------
Lender's appraisal of the Property is such that Lender is not willing to accept
the consequences of the inclusion of Indemnitors' indemnity set forth herein
among the obligations secured by the Deed of Trust and the other Loan Document
and that Lender would not consent to the Requested Actions but for the unsecured
personal liability undertaken by Indemnitors herein. Indemnitors further hereby
acknowledge that even though the representations, warranties, covenants or
agreements of Indemnitors contained herein may be identical or substantially
similar to representations, warranties, covenants or agreements set forth in the
Deed of Trust and secured thereby, and assumed by New Borrower, the obligations
of Indemnitors under this Agreement are not secured by the lien of the Deed of
Trust or the security interests or other collateral described in the Deed of
Trust or the other Loan Documents, it being the intent of Lender to create
separate obligations of Indemnitors hereunder which can be enforced against
Indemnitors without regard to the existence of the Deed of Trust or the other
Loan Documents or the liens or security interests created therein.
(3) Survival. This Agreement shall be deemed to be continuing in
--------
nature and shall remain in full force and effect and shall survive the payment
of the indebtedness evidenced and secured by the Loan Documents and the exercise
of any remedy by Lender under the Deed of Trust or any of the other Loan
Documents, including, without limitation, any foreclosure or deed in lieu
thereof, even if, as a part of such remedy, the Loan is paid or satisfied in
full.
(4) No Subrogation; No Recourse Against Lender. Notwithstanding the
------------------------------------------
satisfaction by Tenant or Parent of any liability hereunder, neither Tenant nor
Parent shall have any right
11
<PAGE>
of subrogation (including any rights arising under California Civil Code
Sections 2848 and 2849), contribution, reimbursement (including any rights
arising under California Civil Code Section 2847), performance (including any
rights arising under California Civil Code Section 2846), or indemnity
whatsoever or any right of recourse to or with respect to New Borrower or the
assets or property of New Borrower or to any collateral for the Loan.
Indemnitors recognize that, pursuant to Section 580d of the California Code of
Civil Procedure, Lender's realization through non-judicial foreclosure upon any
real property constituting security for New Borrower's obligations under the
Loan Documents could terminate any right of Lender to recover a deficiency
judgment against New Borrower, thereby terminating subrogation rights which such
parties otherwise might have against New Borrower. In the absence of an adequate
waiver, such a termination of subrogation rights could create a defense to
enforcement of this Agreement against such parties. Indemnitors hereby
unconditionally and irrevocably waive any such defense. In connection with the
foregoing, each of Tenant and Parent expressly waives any and all rights of
subrogation of Lender against New Borrower, and each of Tenant and Parent hereby
waives any rights to enforce and remedy which Lender may have against New
Borrower and any right to participate in any collateral for the Loan. In
addition to and without in any way limiting the foregoing, each of Tenant and
Parent hereby subordinates any and all indebtedness of New Borrower now or
hereafter owed to Tenant or Parent to all indebtedness of New Borrower to
Lender, and agrees with Lender that neither Tenant nor Parent shall demand or
accept any payment of principal or interest from New Borrower, shall not claim
any offset or other reduction of Tenant's Parent's obligations hereunder because
of any such indebtedness and shall not take any action to obtain any of the
collateral from the Loan. Further, no Indemnitor shall have any right of
recourse against Lender by reason of any action Lender may take or omit to take
under the provisions of this Agreement or under the provisions of any of the
Loan Documents.
(5) Reservation of Rights. Nothing contained in this Agreement shall
---------------------
prevent or in any way diminish or interfere with any rights or remedies,
including, without limitation, the right to contribution, which Lender may have
against New Borrower, any Indemnitor or any other party under the Comprehensive
Environmental Response Compensation and Liability Act of 1980 (codified at
Title 42 U.S.C. (S) 9601 et seq.), as it may be amended from time to time,
-- ---
12
<PAGE>
or any other applicable federal, state or local laws, all such rights being
hereby expressly reserved.
(6) Financial Statements. Each Indemnitor hereby agrees, as a
--------------------
material inducement to Lender to grant its consent as contemplated hereby, to
furnish to Lender promptly upon demand (which will be no more often than as
required under the Lease or the Assumption Agreement) by Lender current and
dated financial statements certified by or on behalf of each Indemnitor
detailing the assets and liabilities of said Indemnitor, in form and substance
acceptable to Lender (the type of financial statements required under the Lease
and the Assumption Agreement shall be an acceptable form). Each Indemnitor
hereby warrants and represents unto Lender that any and all balance sheets, net
worth statements and other financial data which have heretofore been given or
may hereafter be given to Lender with respect to said Indemnitor did or will at
the time of such delivery fairly and accurately present the financial condition
of said Indemnitor.
(7) Rights Cumulative; Payments. Lender's rights under this
---------------------------
Agreement shall be in addition to all rights of Lender under the Note, the Deed
of Trust and the other Loan Documents. FURTHER, PAYMENTS MADE BY INDEMNITORS
UNDER THIS AGREEMENT SHALL NOT REDUCE IN ANY RESPECT NEW BORROWER'S OBLIGATIONS
AND LIABILITIES UNDER THE NOTE, THE DEED OF TRUST AND THE OTHER LOAN DOCUMENTS.
(8) No Limitation on Liability. Indemnitors hereby consent and agree
--------------------------
that Lender may at any time and from time to time without further consent from
Indemnitors do any of the following events, and the liability of Indemnitors
under this Agreement shall be unconditional and absolute and shall in no way be
impaired or limited by any of the following events, whether occurring with or
without notice to Indemnitors or with or without consideration: (i) any
extensions of time for performance required by any of the Loan Documents or
extension or renewal of the Note; (ii) any sale, assignment or foreclosure of
the Note, the Deed of Trust or any of the other Loan Documents or any sale or
transfer of the Property; (iii) any change in the composition of New Borrower,
Parent or Tenant, including, without limitation, the withdrawal or removal of
Indemnitors from any current or future position of ownership, management or
control of New Borrower, Tenant or Parent; (iv) the accuracy or inaccuracy of
the representations and warranties made by Indemnitors herein or by New Borrower
or Tenant in any of the
13
<PAGE>
Loan Documents or the Assumption Agreement; (v) the release of New Borrower or
of any other person or entity from performance or observance of any of the
agreements, covenants, terms or conditions contained in any of the Loan
Documents by operation of law, Lender's voluntary act or otherwise; (vi) the
release of Tenant or of any other person or entity from performance or
observance of any of the agreements, covenants, terms or conditions contained in
the Lease by operation of law or otherwise; (vii) the release, substitution or
subordination in whole or in part of any security for the Loan; (viii) Lender's
failure to record the Assumption Agreement or to file any financing statement
(or Lender's improper recording or filing of the Deed of Trust) or to otherwise
perfect, protect, secure or insure any lien or security interest given as
security for the Loan; (ix) the modification of the terms of any one or more of
the Loan Documents; or (x) the taking or failure to take any action of any type
whatsoever. No such action which Lender shall take or fail to take in connection
with the Loan Documents or any collateral for the Loan, the Lease, nor any
course or dealing with New Borrower, Tenant, Parent, or any other person, shall
limit, impair or release Indemnitors' obligations hereunder, affect this
Agreement in any way or afford Indemnitors any recourse against Lender. Nothing
contained in this Section shall be construed to require Lender to take or
refrain from taking any action referred to herein.
(9) Entire Agreement; Amendment; Severability. This Agreement
-----------------------------------------
contains the entire agreement between the parties respecting the matters herein
set forth and supersedes (except as to the Deed of Trust) all prior agreements,
whether written or oral, between the parties respecting such matters. Any
amendments or modifications hereto, in order to be effective, shall be in
writing and executed by the parties hereto. A determination that any provision
of this Agreement is unenforceable or invalid shall not affect the
enforceability or validity of any other provision, and any determination that
the application of any provision of this Agreement to any person or circumstance
is illegal or unenforceable shall not affect the enforceability or validity of
such provision as it may apply to any other persons or circumstances.
(10) Governing Law; Binding Effect; Waiver of Acceptance. This
---------------------------------------------------
Agreement shall be governed by and construed in accordance with the laws of the
State of California, except to the extent that the applicability of any of such
laws may now or hereafter be
14
<PAGE>
preempted by Federal law, in which case such Federal law shall so govern and be
controlling. This Agreement shall bind each Indemnitor and the heirs, personal
representatives, successors and assigns of each Indemnitor and shall inure to
the benefit of Lender and the officers, directors, shareholders, servicers,
agents and employees of Lender and their respective heirs, successors and
assigns. Notwithstanding the foregoing, Indemnitors shall not assign any of
their respective rights or obligations under this Agreement without the prior
written consent of Lender, which consent may be withheld by Lender in its sole
discretion. Each Indemnitor hereby waives any acceptance of this Agreement by
Lender, and this Agreement shall immediately be binding upon Indemnitors.
(11) Notice. All notices, demands, requests or other communications to
------
be sent by one party to the other hereunder or required by law shall be in
writing and shall be deemed to have been validly given or served by delivery of
the same in person to the intended addressee, or by depositing the same with
Federal Express or another reputable private courier service for next business
day delivery to the intended addressee at its address set forth on the first
page of this Agreement or at such other address as may be designated by such
party as herein provided, or by depositing the same in the United States mail,
postage prepaid, registered or certified mail, return receipt requested,
addressed to the intended addressee at its address set forth on the first page
of this Agreement or at such other address as may be designated by such party as
herein provided. All notices, demands and requests shall be effective upon such
personal delivery, or one (1) business day after being deposited with the
private overnight courier service, like FedEx, or five (5) business days after
being deposited in the United States mail as required above. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given as herein required shall be deemed to be receipt of
the notice, demand or request sent. By giving to the other party hereto at least
fifteen (15) days' prior written notice thereof in accordance with the
provisions hereof, the parties hereto shall have the right from time to time to
change their respective addresses and each shall have the right to specify as
its address any other address within the United States of America.
(12) No Waiver; Time of Essence; Business Days. The failure of any
-----------------------------------------
party hereto to enforce any right or remedy hereunder, or to promptly enforce
any such right or remedy, shall not constitute a waiver thereof nor give rise to
any estoppel
15
<PAGE>
against such party nor excuse any of the parties hereto from their respective
obligations hereunder. Any waiver of such right or remedy must be in writing and
signed by the party to be bound. This Agreement is subject to enforcement at law
or in equity, including actions for damages or specific performance. Time is of
the essence hereof. The term "business day" as used herein shall mean a weekday,
Monday through Friday, except a legal holiday or a day on which banking
institutions in New York, New York are authorized by law to be closed.
(13) Captions for Convenience. The captions and headings of the
------------------------
sections and paragraphs of this Agreement are for convenience of reference only
and shall not be construed in interpreting the provisions hereof.
(14) Attorneys' Fees. In the event it is necessary for Lender to
---------------
retain the services of an attorney or any other consultants in order to enforce
this Agreement, or any portion thereof, Indemnitors agree to pay to Lender any
and all costs and expenses, including, without limitation, reasonable attorneys'
fees, incurred by Lender as a result thereof and such costs, fees and expenses
shall be included in Costs.
(15) Successive Actions. A separate right of action hereunder shall
------------------
arise each time Lender acquires knowledge of any matter indemnified by
Indemnitors under this Agreement. Separate and successive actions may be brought
hereunder to enforce any of the provisions hereof at any time and from time to
time. No action hereunder shall preclude any subsequent action, and Indemnitors
hereby waive and covenant not to assert any defense in the nature of splitting
of causes of action or merger of judgments.
(16) Joint and Several Liability. Notwithstanding anything to the
---------------------------
contrary contained herein, the representations, warranties, covenants and
agreements made by Indemnitors herein, and the liability of Indemnitors
hereunder, is joint and several.
(17) Reliance. Lender would not consent to (i) the transfer of the
--------
Property and the assumption of the Loan by New Borrower or (ii) the Lease
without this Agreement. Accordingly, Indemnitors intentionally and
unconditionally enter into the covenants and agreements as set forth above and
understand that, in reliance upon and in consideration of such covenants and
16
<PAGE>
agreements, Lender shall consent to (i) the transfer of the Property and the
assumption of the Loan by New Borrower and (ii) the Lease and, as part and
parcel thereof, specific monetary and other obligations have been, are being and
shall be entered into which would not be made or entered into but for such
reliance.
(18) Nonrecourse. Any provision of this Agreement or the Loan
-----------
Documents to the contrary notwithstanding, the liability of New Borrower
hereunder, if any, shall be satisfied solely from the assets of New Borrower,
including the Project, but not from New Borrower's rights to the CDs or the CD
Pledge Agreement and any other collateral pledged thereunder. No recourse under
or upon any representation, warranty, obligation covenant or agreement contained
herein or for any claim based herein or in respect hereto shall be had against
any past, present or future member, manager, stockholder, director, officer,
employee, attorney, administrator, trustee or agent, as such, of New Borrower or
the Managing Member of New Borrower or any of their respective assets or
properties unless such claim is based on the fraud, gross negligence or willful
misconduct of such party.
Furthermore, Lender acknowledges and agrees that it shall have no right,
interest (including security interest or lien) or claim to the CDs or New
Borrower's rights under the CD Pledge Agreement, it being understood that KCCI
and SELCO have each relied upon the pledge to KCCI and SELCO of the CDs by
Tenant and New Borrower and the other collateral pledged under the CD Pledge
Agreement in KCCI making a loan to SELCO and SELCO using the proceeds of such
loan, plus additional equity money provided by SELCO in making an equity
contribution to New Borrower. All capitalized terms used in this paragraph shall
have the meanings given such terms in the Assumption Agreement.
(19) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be effective only upon delivery and thereafter
shall be deemed an original, and all of which shall be taken to be one and the
same instrument, for the same effect as if all parties hereto had signed the
same signature page. Any signature page of this Agreement may be detached from
any counterpart of this Agreement without impairing the legal effect of any
signatures thereon and may be attached to another counterpart of this Agreement
identical in form hereto but having attached to it one or more additional
signature pages.
17
<PAGE>
(20) SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
------------------------------------------------
(1) INDEMNITORS, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE
ADVICE OF COMPETENT COUNSEL, (A) SUBMIT TO PERSONAL JURISDICTION
IN THE STATE OF CALIFORNIA OVER ANY SUIT, ACTION OR PROCEEDING BY
ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT, (B) AGREE
THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN SANTA
CLARA COUNTY, CALIFORNIA, (C) SUBMIT TO THE JURISDICTION OF SUCH
COURTS, AND, (D) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREE
THAT NEITHER OF THEM WILL BRING ANY ACTION, SUIT OR PROCEEDING IN
ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF
LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER
FORUM). INDEMNITORS FURTHER CONSENT AND AGREE TO SERVICE OF ANY
SUMMONS, COMPLIANT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT,
ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL,
POSTAGE PREPAID, TO THE INDEMNITORS AT THE ADDRESS FOR NOTICES
DESCRIBED IN SECTION 7(K) HEREOF, AND CONSENT AND AGREE THAT SUCH
SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE
SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR
EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY
LAW).
(2) LENDER AND INDEMNITORS, TO THE FULL EXTENT PERMITTED BY LAW,
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON
THE ADVICE OF COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER
FORGO THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS
AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR
INDEMNITORS, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS,
MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS
AFFILIATED WITH LENDER OR INDEMNITORS, IN EACH OF THE FOREGOING
CASES, SOUNDING IN CONTRACT, TORT OR OTHERWISE.
18
<PAGE>
(21) Waiver by Indemnitors. New Borrower, Tenant and Parent covenant
---------------------
and agree that upon the commencement of a voluntary or involuntary bankruptcy
proceeding by or against New Borrower, neither New Borrower, Tenant nor Parent
shall seek a supplemental stay or otherwise pursuant to 11 U.S.C. (S) 105 or any
other provision of the Bankruptcy Reform Act of 1978, as amended, or any other
debtor relief law (whether statutory, common law, case law, or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, to stay, interdict, condition, reduce or inhibit the ability of
Lender to enforce any rights of Lender against New Borrower, Tenant or Parent by
virtue of this Agreement or otherwise.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE>
IN WITNESS WHEREOF, Indemnitors have executed this Hazardous Substances
Indemnity Agreement as of the day and year first above written.
NEW BORROWER:
THE ATRIUM OF SAN JOSE LLC, a Delaware
limited liability company
By: The Atrium of San Jose, Inc., a
Delaware corporation
Its: Managing Member
By: ___________________________
Name: _________________________
Its:___________________________
TENANT:
BROOKDALE LIVING COMMUNITIES OF
CALIFORNIA, INC., a Delaware corporation
By: ________________________________
Name: ______________________________
Title:______________________________
PARENT:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:_________________________________
Name: ______________________________
Title:______________________________
20
<PAGE>
EXHIBIT 10.7
INDEMNITY AND
-------------
GUARANTY AGREEMENT
------------------
THIS INDEMNITY AND GUARANTY AGREEMENT (this "Agreement") made as of the ___
day of __________________, 1998, by BROOKDALE LIVING COMMUNITIES, INC., a
Delaware corporation ("Parent"), whose address is 77 West Wacker, Suite 4400,
Chicago, IL 60601, Attention: Darryl W. Copeland, Jr. ("Indemnitor"), in favor
of HEALTHCARE REALTY TRUST INCORPORATED, a Maryland corporation ("HR"), whose
address is 3310 West End Avenue, Suite 400, Nashville, TN 37203, Attention:
Roger West.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Brookdale Living Communities of California, Inc., a Delaware
corporation (the "Lessee") has entered into a certain Lease Agreement (the
"Lease") dated on or about the day hereof with The Atrium of San Jose LLC
("Owner") pursuant to which Owner shall lease to Lessee certain property
commonly known as The Atrium at San Jose in San Jose, California.
WHEREAS, HR, pursuant to a Loan and Participation Agreement and other
related documents (collectively, the "HR Loan Documents") dated on or about the
date hereof, has made a loan (the "HR Loan") to Selco Service Corporation
("SELCO") which, in turn, contributed the proceeds thereof to Owner in return
for 99% of the membership interests in Owner and 100% of the issued and
outstanding shares of the managing member of Owner, the proceeds of which
capital contribution are to be used to acquire the Leased Property.
WHEREAS, Indemnitor is the parent of Lessee and as such will indirectly
benefit from the Lease.
WHEREAS, HR would not have entered into the Transactions but for
Indemnitor's agreement to Indemnify HR for certain acts and omissions of Lessee
as set forth more particularly herein.
NOW, THEREFORE, in consideration of the covenants contained herein, and
other good and valuable consideration:
I. Definitions. Unless otherwise defined herein, all capitalized terms
-----------
shall have the meanings assigned to them in the Lease.
I. Indemnity and Guaranty. Indemnitor hereby assumes liability for,
----------------------
hereby guarantees payment to HR of, hereby agrees to pay, protect, defend and
save HR harmless from and against, and hereby indemnifies HR from and against
any and all liabilities, obligations, losses, damages, costs and expenses
(including, without limitation,
<PAGE>
reasonable attorneys' fees), causes of action, suits, claims, demands and
judgments of any nature or description whatsoever (collectively, "Costs") which
may at any time be imposed upon, incurred by or awarded against HR as a result
of:
A. Failure of Lessee to comply with the provisions of Section 6, Section
13(a)(i) (but only to the extent that portion of Section 13(a)(i) precedes the
text "Without limiting the generality of the foregoing . . . ," Section
13(a)(iii), and Sections 34(a), (c), and (e) of the Lease;
A. Proceeds paid under any insurance policies (or paid as a result of any
other claim or cause of action against any person or entity) by reason of
damage, loss or destruction to all or any portion of the Leased Property, to the
full extent of such proceeds not previously delivered to HR, but which, under
the terms of the Lease or the HR Loan Documents, the Senior Loan Documents and
the Participation Agreement should have been delivered to HR;
A. Proceeds or awards resulting from the condemnation or other taking in
lieu of condemnation of all or any portion of the Leased Property, or any of
them, to the full extent of such proceeds or awards not previously delivered to
HR, but which, under the terms of the Lease or the HR Loan Documents, should
have been delivered to HR;
A. All tenant security deposits or other refundable deposits paid to or
held by Lessee or any other person or entity in connection with leases of all or
any portion of the Leased Property which are not applied in accordance with the
terms of the Lease or other agreement including, without limitation the Senior
Loan Documents;
A. Rent and other payments received from tenants under leases of all or
any portion of the Leased Property paid more than one month in advance.
A. Rents, issues, profits and revenues of all or any portion of the
Leased Property received or applicable to a period after any Event of Default
under the HR Loan Documents resulting from an Event of Default by Lessor under
the Lease which are not either applied to the ordinary and necessary expenses of
owning and operating the Leased Property or applied in a manner permitted under
the Senior Loan Documents and the Lease;
A. Damage to all or any portion of the Leased Property as a result of the
intentional misconduct or gross negligence of Lessee or any of its principals,
officers, or any agent or employee of such persons, or any removal of all or any
portion of the Leased Property in violation of the terms of the Lease, to the
full extent of the losses or damages incurred by HR on account of such damage or
removal;
<PAGE>
A. Failure by Lessee to pay any valid taxes, assessments, mechanic's
liens, materialmen's liens or other liens which could create liens on any
portion of the Leased Property to the full extent of the amount claimed by any
such lien claimant; and
B. Fraud or material misrepresentation by Lessee or any of its
principals, officers or general partners, any guarantor, any indemnitor or any
agent, employee or other person authorized or apparently authorized to make
statements or representations on behalf of Lessee, any member, principal, or
officer of Lessee, or any guarantor or any indemnitor, to the full extent of any
losses, damages and expenses of HR on account thereof.
This is a guaranty of payment and performance and not of collection. The
liability of Indemnitor under this Agreement shall be direct and immediate and
not conditional or contingent upon the pursuit of any remedies against SELCO,
Lessor, or Lessee or any other person (including, without limitation, other
guarantors, if any), nor against the collateral for the HR Loan. Indemnitor
waives any right to require that an action be brought against SELCO, Lessor, or
Lessee or any other person or to require that resort be had to any collateral
for the HR Loan or to any balance of any deposit account or credit on the books
of HR in favor of Lessee or any other person. In the event, on account of the
Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law
(whether statutory, common law, case law or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable,
SELCO, Lessor, or Lessee shall be relieved of or fail to incur any debt,
obligation or liability as provided in the Lease or HR Loan Documents,
Indemnitor shall nevertheless be fully liable therefor to the full extent that
SELCO, Lessor, or Lessee was liable therefor, or that Indemnitor is liable
therefor as set forth in this Indemnity. In the event of a default under the
Lease or HR Loan Documents which is not cured within any applicable grace or
cure period, HR shall have the right to enforce its rights, powers and remedies
(including, without limitation, foreclosure of all or any portion of the
collateral for the HR Loan) thereunder or hereunder, in any order, and all
rights, powers and remedies available to HR in such event shall be non-exclusive
and cumulative of all other rights, powers and remedies provided thereunder or
hereunder or by law or in equity. If the indebtedness and obligations
guaranteed hereby are partially paid or discharged by reason of the exercise of
any of the remedies available to HR, this Agreement shall nevertheless remain in
full force and effect, and Indemnitor shall remain liable for all remaining
indebtedness and obligations guaranteed hereby, even though any rights which
Indemnitor may have against SELCO, Lessor, or Lessee may be destroyed or
diminished by the exercise of any such remedy.
I. Indemnification Procedures.
--------------------------
A. If any action shall be brought against HR based upon any of the
matters for which HR is indemnified hereunder, HR shall notify Indemnitor in
writing thereof and Indemnitor shall promptly assume the defense thereof,
including, without limitation, the employment of counsel reasonably acceptable
to HR and the negotiation of any settlement; provided, however, that any failure
of HR to notify Indemnitor of such
<PAGE>
matter shall not impair or reduce the obligations of Indemnitor hereunder. In
the event Indemnitor shall fail to discharge or undertake to defend HR against
any claim, loss or liability for which HR is indemnified hereunder, HR may, at
its sole option and election, defend or settle such claim, loss or liability.
The liability of Indemnitor to HR hereunder shall be conclusively established by
such settlement, provided such settlement is made in good faith, the amount of
such liability to include both the settlement consideration and the costs and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, incurred by HR in effecting such settlement. In such event, such
settlement consideration, costs and expenses shall be included in Costs and
Indemnitor shall pay the same as hereinafter provided. HR's good faith in any
such settlement shall be conclusively established if the settlement is made on
the advice of independent legal counsel for HR.
A. Indemnitor shall not, without the prior written consent of HR: (i)
settle or compromise any action, suit, proceeding or claim or consent to the
entry of any judgment that does not include as an unconditional term thereof the
delivery by the claimant or plaintiff to HR of a full and complete written
release of HR (in form, scope and substance satisfactory to HR in its sole
discretion) from all liability in respect of such action, suit, proceeding or
claim and a dismissal with prejudice of such action, suit, proceeding or claim;
or (ii) settle or compromise any action, suit, proceeding or claim in any manner
that may adversely affect HR or obligate HR to pay any sum or perform any
obligation as determined by HR in its sole discretion.
A. All Costs shall be reimbursable to HR when and as incurred and, in the
event of any litigation, claim or other proceeding, without any requirement of
waiting for the ultimate outcome of such litigation, claim or other proceeding,
and Indemnitor shall pay to HR any and all Costs within ten (10) business days
after written notice from HR itemizing the amounts thereof incurred to the date
of such notice. In addition to any other remedy available for the failure of
Indemnitor to periodically pay such Costs, such Costs, if not paid within said
ten (10) business day period, shall bear interest at the Default Interest Rate
(as defined in the HR Loan Documents).
I. Reinstatement of Obligations. If at any time all or any part of any
----------------------------
payment made by Indemnitor or received by HR from Indemnitor under or with
respect to this Agreement is or must be rescinded or returned for any reason
whatsoever (including, but not limited to, the insolvency, bankruptcy or
reorganization of Indemnitor), then the obligations of Indemnitor hereunder
shall, to the extent of the payment rescinded or returned, be deemed to have
continued in existence, notwithstanding such previous payment made by
Indemnitor, or receipt of payment by HR, and the obligations of Indemnitor
hereunder shall continue to be effective or be reinstated, as the case may be,
as to such payment, all as though such previous payment by Indemnitor had never
been made.
<PAGE>
I. Waivers by Indemnitor. To the extent permitted by law and except as
---------------------
otherwise provided herein, Indemnitor hereby waives and agrees not to assert or
take advantage of and shall not be released or exonerated as a result of:
A. Any right to require HR to proceed against SELCO, Lessor, or Lessee or
any other indemnitor or guarantor or any other person or to proceed against or
exhaust any security held by HR at any time or to pursue any other remedy in
HR's power or under any other agreement before proceeding against Indemnitor
hereunder;
A. (Intentionally Deleted)
A. Any defense that may arise by reason of the incapacity, lack of
authority, death or disability of any other person or persons or the failure of
HR to file or enforce a claim against the estate (in administration, bankruptcy
or any other proceeding) of any other person or persons;
A. Demand, presentment for payment, notice of nonpayment, protest, notice
of protest and all other notices of any kind, or the lack of any thereof,
including, without limiting the generality of the foregoing, notice of the
existence, creation or incurring of any new or additional indebtedness or
obligation or of any action or nonaction on the part of SELCO, Lessor, or
Lessee, any endorser or creditor of SELCO, Lessor, or Lessee or of Indemnitor or
on the part of any other person whomsoever under this or any other instrument in
connection with any obligation or evidence of indebtedness held by HR;
A. All rights and defenses arising out of an election of remedies by HR,
even though that election of remedies, such as a nonjudicial foreclosure with
respect to security for a guaranteed obligation, has destroyed Indemnitor's
rights of subrogation and reimbursement against Borrower by the operation of
Section 580d of the California Code of Civil Procedure or otherwise;
A. Any right or claim of right to cause a marshaling of the assets of
Indemnitor;
A. Any principle or provision of law, statutory or otherwise, which is or
might be in conflict with the terms and provisions of this Agreement;
A. Any duty on the party of HR to disclose to Indemnitor any facts HR may
now or hereafter know about SELCO, Lessor, or Lessee or the Leased Property,
regardless of whether HR has reason to believe that any such facts materially
increase the risk beyond that which Indemnitor intends to assume or has reason
to believe that such facts are unknown to Indemnitor or has a reasonable
opportunity to communicate such facts to Indemnitor, it being understood and
agreed that Indemnitor is fully responsible for being and keeping informed of
the financial condition of SELCO, Lessor, and Lessee,
<PAGE>
of the condition of the Leased Property and of any and all circumstances bearing
on the risk that liability may be incurred by Indemnitor hereunder;
A. Any lack of notice of disposition or of manner of disposition of any
collateral for the HR Loan;
A. Any invalidity, irregularity or unenforceability, in whole or in part,
of any one or more of the HR Loan Documents;
A. Any lack of commercial reasonableness in dealing with the collateral
for the HR Loan;
A. Any deficiencies in the collateral for the HR Loan or any deficiency
in the ability of HR to collect or to obtain performance from any persons or
entities now or hereafter liable for the payment and performance of any
obligation hereby guaranteed;
A. An assertion or claim that the automatic stay provided by 11 U.S.C.
(S)362 (arising upon the voluntary or involuntary bankruptcy proceeding of
SELCO, Lessor, or Lessee) or any other stay provided under any other debtor
relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, shall operate or be interpreted to stay, interdict, condition,
reduce or inhibit the ability of HR to enforce any of its rights, whether now or
hereafter required, which HR may have against Indemnitor or the collateral for
the HR Loan;
A. Any modifications of the HR Loan Documents or any obligation of SELCO,
Lessor, or Lessee relating to the HR Loan by operation of law or by action of
any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or
any other debtor relief law (whether statutory, common law, case law or
otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or
otherwise; and
A. Any action, occurrence, event or matter consented to by Indemnitor
under Section 6(h) hereof, under any other provision hereof, or otherwise.
I. General Provisions.
------------------
A. Fully Recourse. All of the terms and provisions of this Agreement are
--------------
recourse obligations of Indemnitor and not restricted by any limitation on
personal liability.
A. Unsecured Obligations. Indemnitor hereby acknowledges that HR's
---------------------
appraisal of the Property is such that HR is not willing to accept the
consequences of the inclusion of Indemnitor's indemnity set forth herein among
the obligations evidenced and secured by the HR Loan Documents and that HR would
not make the HR Loan but for the unsecured personal liability undertaken by
Indemnitor herein.
<PAGE>
A. Survival. This Agreement shall be deemed to be continuing in nature
--------
and shall remain in full force and effect and shall survive the termination of
the Lease and the exercise of any remedy by HR under the HR Loan Documents even
if, as a part of such remedy, the HR Loan is paid or satisfied in full, and for
so long as HR has any liability or obligation under or with respect to the loan
assumed by Lessor on or about the date hereof from LaSalle National Bank, as
Trustee for the Registered Holders of DLJ Mortgage Acceptance Corp., Commercial
Mortgage Pass-Through Certificates, Series 1996-CF1 (the "Senior Loan").
A. No Subrogation; No Recourse Against HR. Notwithstanding the
--------------------------------------
satisfaction by Indemnitor of any liability hereunder, Indemnitor shall not have
any right of subrogation, contribution, reimbursement, performance or indemnity
whatsoever or any right of recourse to or with respect to SELCO, Lessor, or
Lessee or the assets or property of SELCO, Lessor, or Lessee or to any
collateral for the HR Loan. In connection with the foregoing, Indemnitor
expressly waives any and all rights of subrogation against SELCO, Lessor, or
Lessee, and Indemnitor hereby waives any rights to enforce any remedy which HR
may have against SELCO, Lessor, or Lessee and any right to participate in any
collateral for the HR Loan. In addition to and without in any way limiting the
foregoing, Indemnitor hereby subordinates any and all indebtedness of SELCO,
Lessor, or Lessee now or hereafter owed to Indemnitor to all indebtedness of
SELCO, Lessor, or Lessee to HR, and agrees with HR that Indemnitor shall not
demand or accept any payment of principal or interest from SELCO, Lessor, or
Lessee, shall not claim any offset or other reduction of Indemnitor's
obligations hereunder because of any such indebtedness and shall not take any
action to obtain any of the collateral for the HR Loan. Further, Indemnitor
shall not have any right of recourse against HR by reason of any action HR may
take or omit to take under the provisions of this Agreement or under the
provisions of any of the HR Loan Documents or the Lease.
A. Financial Statements. Indemnitor hereby agrees, as a material
--------------------
inducement to HR to grant its consent as contemplated hereby, to furnish to HR
promptly upon demand by HR current and dated financial statements detailing the
assets and liabilities of Indemnitor certified by Indemnitor, in form and
reasonably substance acceptable to HR. Indemnitor hereby warrants and represents
unto HR that any and all balance sheets, net worth statements and other
financial data which have heretofore been given or may hereafter be given to HR
with respect to Indemnitor did or will at the time of such delivery fairly and
accurately present the financial condition of Indemnitor.
A. Rights Cumulative; Payments. HR's rights under this Agreement shall be
---------------------------
in addition to all rights of HR under the HR Loan Documents. FURTHER, PAYMENTS
MADE BY INDEMNITOR UNDER THIS AGREEMENT SHALL NOT REDUCE IN ANY RESPECT SELCO'S
OBLIGATIONS AND LIABILITIES UNDER THE HR LOAN DOCUMENTS.
<PAGE>
A. No Limitation on Liability. Indemnitor hereby consents and agrees that
--------------------------
HR may, at any time and from time to time without further consent from
Indemnitor, do any of the following events, and the liability of Indemnitor
under this Agreement shall be unconditional and absolute and shall in no way be
impaired or limited by any of the following events, whether occurring with or
without notice to Indemnitor or with or without consideration: (i) any
extensions of time for performance required by any of the HR Loan Documents;
(ii) any sale, assignment or foreclosure of the HR Loan Documents or any sale or
transfer of the Leased Property; (iii) any change in the composition of SELCO,
Lessor, or Lessee, including, without limitation, the withdrawal or removal of
Indemnitor from any current or future position of ownership, management or
control of Lessee; (iv) the accuracy or inaccuracy of the representations and
warranties made by Indemnitor herein or by SELCO, Lessor, or Lessee in any of
the HR Loan Documents or the Lease; (v) the release of SELCO, Lessor, or Lessee
or of any other person or entity from performance or observance of any of the
agreements, covenants, terms or conditions contained in any of the HR Loan
Documents or the Lease by operation of law, HR's voluntary act or otherwise;
(vi) the release, substitution or subordination in whole or in part of any
security for the HR Loan; (vii) HR's failure to record or to file any financing
statement (or HR's improper recording or filing) or to otherwise perfect,
protect, secure or insure any lien or security interest given as security for
the HR Loan or the Lease; (viii) the modification of the terms of any one or
more of the HR Loan Documents; or (ix) the taking or failure to take any action
of any type whatsoever. No such action which HR shall take or fail to take in
connection with the HR Loan Documents or the Lease, or any collateral for the HR
Loan, the Lease, nor any course or dealing with SELCO, Lessor, Lessee, or any
other person, shall limit, impair or release Indemnitor's obligations hereunder,
affect this Agreement in any way or afford Indemnitor any recourse against HR.
Nothing contained in this Section shall be construed to require HR to take or
refrain from taking any action referred to herein.
A. Entire Agreement; Amendment; Severability. This Agreement contains the
-----------------------------------------
entire agreement between the parties respecting the matters herein set forth and
supersedes all prior agreements, whether written or oral, between the parties
respecting such matters. Any amendments or modifications hereto, in order to be
effective, shall be in writing and executed by the parties hereto. A
determination that any provision of this Agreement is unenforceable or invalid
shall not affect the enforceability or validity of any other provision, and any
determination that the application of any provision of this Agreement to any
person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to any other
persons or circumstances.
A. Governing Law; Binding Effect; Waiver of Acceptance. This Agreement
---------------------------------------------------
shall be governed by and construed in accordance with the laws of the State of
Tennessee, except to the extent that the applicability of any of such laws may
now or hereafter be preempted by Federal law, in which case such Federal law
shall so govern and be controlling. This Agreement shall bind Indemnitor and the
heirs, personal representatives, successors and assigns of Indemnitor and shall
inure to the benefit of HR
<PAGE>
and the officers, directors, shareholders, servicers, agent and employees of HR
and their respective heirs, successors and assigns. Notwithstanding the
foregoing, Indemnitor shall not assign any of its rights or obligations under
this Agreement except to the successor of all or substantially all of the assets
of Indemnitor without the prior written consent of HR, which consent may be
withheld by HR in its sole discretion. Indemnitor hereby waives any acceptance
of this Agreement by HR, and this Agreement shall immediately be binding upon
Indemnitor.
A. Notice. All notices, demands, requests or other communications to be
------
sent by one party to the other hereunder or required by law shall be in writing
and shall be deemed to have been validly given or served by delivery of the same
in person to the intended addressee, or by depositing the same with Federal
Express or another reputable private courier service for next business day
delivery to the intended addressee at its address set forth on the first page of
this Agreement or at such other address as may be designated by such party as
herein provided, or by depositing the same in the United States mail, postage
prepaid, registered or certified mail, return receipt requested, addressed to
the intended addressee at its address set forth on the first page of this
Agreement or at such other address as may be designated by such party as herein
provided. All notices, demands and requests shall be effective upon such
personal delivery, or one (1) business day after being deposited with the
private courier service, or two (2) business days after being deposited in the
United States mail as required above. Rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice was given
as herein required shall be deemed to be receipt of the notice, demand or
request sent. By giving to the other party hereto at least fifteen (15) days'
prior written notice thereof in accordance with the provisions hereof, the
parties hereto shall have the right from time to time to change their respective
addresses and each shall have the right to specify as its address any other
address within the United States of America.
If to Parent: Brookdale Living Communities, Inc.
77 West Wacker, Suite 4400
Chicago, IL 60601
Attn: Darryl W. Copeland, Jr.
With a copy to: Robert J. Rudnik
Brookdale Living Communities, Inc.
77 West Wacker, Suite 4400
Chicago, IL 60601
and Douglas E. Wambach
Burke, Warren, MacKay & Serritella, P.C.
22nd Floor, IBM Plaza
330 North Wabash Avenue
Chicago, IL 60611
<PAGE>
If to HR: Healthcare Realty Trust Incorporated
3310 West End Avenue, Suite 400
Nashville, TN 37203
Attn: Roger West
With a copy to: Richard D. Bird
Baker, Donelson, Bearman & Caldwell
1700 Nashville City Center
511 Union Street
Nashville, TN 37219
A. No Waiver; Time of Essence; Business Day. The failure of any party
----------------------------------------
hereto to enforce any right or remedy hereunder, or to promptly enforce any such
right or remedy, shall not constitute a waiver thereof nor give rise to any
estoppel against such party nor excuse any of the parties hereto from their
respective obligations hereunder. Any waiver of such right or remedy must be in
writing and signed by the party to be bound. This Agreement is subject to
enforcement at law or in equity, including actions for damages or specific
performance. Time is of the essence hereof. The term "business day" as used
herein shall mean a weekday, Monday through Friday, except a legal holiday or a
day on which banking institutions in Chicago, Illinois are authorized by law to
be closed.
A. Captions for Convenience. The captions and headings of the sections
------------------------
and paragraphs of this Agreement are for convenience of reference only and shall
not be construed in interpreting the provisions hereof.
A. Attorneys' Fees. In the event it is necessary for HR to retain the
---------------
services of an attorney or any other consultants in order to enforce this
Agreement, or any portion thereof, Indemnitor agrees to pay to HR any and all
costs and expenses, including, without limitation, reasonable attorneys' fees,
incurred by HR as a result thereof and such costs, fees and expenses shall be
included in Costs. In the event of any dispute hereunder, the prevailing party
shall be entitled to recover its reasonable attorneys' fees in connection
therewith, in addition to any relief granted.
A. Successive Actions. A separate right of action hereunder shall arise
------------------
each time HR acquires knowledge of any matter indemnified or guaranteed by
Indemnitor under this Agreement. Separate and successive actions may be brought
hereunder to enforce any of the provisions hereof at any time and from time to
time. No action hereunder shall preclude any subsequent action, and Indemnitor
hereby waives and covenants not to assert any defense in the nature of splitting
of causes of action or merger of judgments.
A. Reliance. HR would not grant its consent contemplated hereby without
--------
this Agreement. Accordingly, Indemnitor intentionally and unconditionally enters
into the covenants and agreements as set forth above and understands that, in
<PAGE>
reliance upon and in consideration of such covenants and agreements, HR has
agreed to give its consent and, as part and parcel thereof, specific monetary
and other obligations have been, are being and shall be entered into which would
not be made or entered into but for such reliance.
A. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
------------------------------------------------
(1) INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL, (A) SUBMIT TO PERSONAL JURISDICTION IN THE STATE OF
DELAWARE OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR
RELATING TO THIS AGREEMENT, (B) AGREES THAT ANY SUCH ACTION, SUIT OR
PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION SITTING IN WILMINGTON, DELAWARE, (C) SUBMITS TO THE
JURISDICTION OF SUCH COURTS, AND (D) TO THE FULLEST EXTENT PERMITTED BY
LAW, AGREES THAT INDEMNITOR WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING
IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF HR TO
BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM). INDEMNITOR
FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR
CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE INDEMNITOR AT THE ADDRESS FOR
NOTICES DESCRIBED IN SECTION 6(k) HEREOF, AND CONSENT AND AGREE THAT SUCH
SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT
NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED
IN ANY OTHER MANNER PERMITTED BY LAW).
(2) INDEMNITEE AND INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW,
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE
OF COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER FOREGO THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OR HR OR
INDEMNITOR, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS,
EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH HR OR
INDEMNITOR, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE.
A. Waiver by Indemnitor. Indemnitor covenants and agrees that, upon
--------------------
the commencement of a voluntary or involuntary bankruptcy proceeding by or
<PAGE>
against SELCO, Lessor, or Lessee, Indemnitor shall not seek or cause SELCO,
Lessor, or Lessee or any other person or entity to seek a supplemental stay or
other relief, whether injunctive or otherwise, pursuant to 11 U.S.C. (S)105 or
any other provision of the Bankruptcy Reform Act of 1978, as amended, or any
other debtor relief law, (whether statutory, common law, case law or otherwise)
of any jurisdiction whatsoever, now or hereafter in effect, which may be or
become applicable, to stay, interdict, condition, reduce or inhibit the ability
of HR to enforce any rights of HR against Indemnitor or the collateral for the
HR Loan by virtue of this Agreement or otherwise.
[Signature on following page]
<PAGE>
IN WITNESS WHEREOF, Indemnitor has executed this Agreement as of the day
and year first above written.
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:
Name:
Title:
<PAGE>
EXHIBIT 10.8
INDEMNITY AGREEMENT
-------------------
THIS INDEMNITY AGREEMENT (this "Agreement"), made as of May __, 1998, from
---------
BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation (the "Guarantor"),
---------
having an office at 77 West Wacker Drive, Chicago, Illinois 60601, Attention:
Darryl W. Copeland, Jr., Telefax Number (312) 977-3699 to The Atrium of San Jose
LLC, a Delaware limited liability company (the "Owner"), having an address c/o
-----
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, HEALTH CARE REALTY TRUST, a Maryland
corporation ("Healthcare Realty"), having an office at 3310 West End, Suite 700,
-----------------
Nashville, Tennessee 37203, Attention: Roger West, Telefax Number (615) 269-
8461, KEY CORPORATE CAPITAL INC., a Michigan corporation ("Key"), having an
office at 54 State Street, Albany, New York 12207, Attention: Key Global
Transaction Support, Telefax Number (518) 487-4017, SELCO SERVICE CORPORATION,
an Ohio corporation ("SELCO") having an office at c/o KeyCorp Leasing, 54 State
-----
Street, Albany, New York 12207, Attention: John State, Telefax Number (518) 487-
4017, and WILMINGTON TRUST COMPANY, a Delaware banking corporation (the
"Administrator") having an office at Rodney Square North, 1100 North Market
-------------
Street, Wilmington, Delaware 19890-0001.
RECITALS
WHEREAS, the Owner is being formed to acquire certain real property located
in San Jose, California more particularly described in and pursuant to a
Purchase and Sale Agreement dated as of February 10, 1998 (the "P&S") between
The Atrium Venture, a California limited partnership (the "Seller"), and the
Guarantor, which P&S has been assigned by the Guarantor to Owner;
WHEREAS, the Owner is acquiring the above-described property subject to
existing mortgage indebtedness in favor of the Senior Lender;
WHEREAS, in order to finance the acquisition of the purchase price payable
pursuant to the P&S, SELCO, as the direct and indirect owner of one hundred
percent (100%) of the membership interests in the Owner, has agreed to make an
equity contribution to the Owner, such contribution to be made from the
following sources: (i) the proceeds of a nonrecourse loan to be made to SELCO
from HEALTHCARE REALTY in the amount of SIX MILLION EIGHT HUNDRED THOUSAND
DOLLARS ($6,800,000) (the "A Investor Loan"), (ii) the proceeds of a nonrecourse
loan to be made to SELCO from Key in the amount of SIX MILLION TEN THOUSAND SIX
HUNDRED TWO AND 12/100 DOLLARS ($6,010.602.12) (the "B Investor Loan," and
together with the A Investor Loan, the "Investor Loans"), and (iii) equity
provided by SELCO from its own funds in the amount of NINE HUNDRED FIFTY FOUR
THOUSAND DOLLARS ($954,000) (the "SELCO Contribution");
<PAGE>
WHEREAS, the Owner and Brookdale Living Communities of California, Inc.
(the "Lessee") are entering into a certain Lease Agreement dated the date
herewith (the "Lease"), pursuant to which Lessee shall lease, manage and operate
the Leased Property;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereby covenant, agree, represent and warrant as follows:
Section 1. Defined Terms. Unless the context otherwise requires,
-------------
capitalized terms used but not otherwise defined herein shall have the meanings
provided therefore in the Lease.
Section 2. Indemnification.
---------------
(a) The Guarantor agrees to indemnify each Indemnified Party in the same
manner and to the same extent as the Lessee has agreed to indemnify each
Indemnified Party (as defined in the Lease) in Sections 8(a), 21 and 22 of the
Lease, provided, however, that the foregoing indemnification obligation shall
not give rise to any obligation on the part of the Guarantor to pay Base Rental,
or Additional Rental or Termination Value under the Lease or the amounts
described in Sections 2.4.4, 2.4.5 or 2.4.6 of the Participation Agreement.
(b) Nothing in this Agreement shall be deemed to deprive any Indemnified
Party of any rights or remedies provided to it elsewhere in this Agreement or in
the other Transaction Documents or otherwise available to it under law.
(c) With respect to those matters for which Guarantor has agreed to
indemnify each Indemnified Party hereunder, and to the maximum extent permitted
by applicable law, Guarantor waives and releases each Indemnified Party from any
rights or defenses Guarantor may have under common law or Environmental Legal
Requirements for liability arising from or resulting from the presence, use or
release of Hazardous Materials except to the extent directly caused by the
fraud, gross negligence or willful misconduct of any Indemnified Party.
Section 3. Payment. All payments due to any Indemnified under this
-------
Agreement shall be payable to such Indemnified Party within ten (10) days
after written demand therefor, and shall bear interest at the Default Rate from
the date such payment is due until the date of payment.
Section 4. Governing Law.
-------------
(a) The parties agree that the State of California has a substantial
relationship to the parties and to the underlying transaction embodied hereby,
and in all respects, including, without limitation, matters of construction,
validity and performance, this Agreement and the obligations arising hereunder
shall be governed by, and construed in accordance with, the laws of the State of
California applicable to contracts made and performed in such State and any
applicable law of the United States of America. To the fullest extent permitted
by law, Guarantor hereby unconditionally and irrevocably waives any claim to
assert that the law of any other jurisdiction
<PAGE>
governs this Agreement, and this Agreement shall be governed by and construed in
accordance with the laws of the State of California.
(b) Any legal suit, action or proceeding against any Indemnified Party or
Guarantor arising out of or relating to this Agreement shall be instituted in
any federal or state court in San Francisco, California, and Guarantor waives
any objection which it may now or hereafter have to the laying of venue of any
such suit, action or proceeding, and Guarantor hereby irrevocably submits to the
jurisdiction of any such court in any suit, action or proceeding. Guarantor does
hereby designate and appoint Corporation Trust Company, as its authorized agent
to accept and acknowledge on its behalf service of any and all process which may
be served in any such suit, action or proceeding in any federal or state court
in San Francisco, California, and agrees that service of process upon said agent
at said address (or at such other office in San Francisco, California as such
agent shall designate in writing in accordance with the terms hereof) with a
copy of same to Guarantor in the manner hereinafter described and written notice
of said service of Guarantor mailed or delivered to Guarantor in the manner
provided herein shall be deemed in every respect effective service of process
upon Guarantor in any such suit, action or proceeding in the State of
California. Guarantor (i) shall give prompt notice to each Indemnified Party of
any changed address of its authorized agent hereunder, (ii) may at any time and
from time to time designate a substitute authorized agent with an office in San
Francisco, California (which office shall be designated as the address for
service of process), and (iii) shall promptly designate such a substitute if its
authorized agent ceases to have an office in San Francisco, California or is
dissolved without leaving a successor.
Section 5. Modification, Waiver in Writing. No modification, amendment,
-------------------------------
extension, discharge, termination or waiver of any provision of this Agreement
or consent to any departure by Guarantor therefrom, shall in any event be
effective unless the same shall be in a writing signed by the Indemnified Party
against whom enforcement is sought or who would otherwise be adversely affected,
and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to or demand on Guarantor shall entitle Guarantor to
any other or future notice or demand in the same, similar or other
circumstances.
Section 6. Delay Not a Waiver. Neither any failure nor any delay on the
------------------
part of any Indemnified Party in insisting upon strict performance of any term,
condition, covenant or agreement or exercising any right, power, remedy or
privilege hereunder, shall operate as or constitute a waiver thereof, nor shall
a single or partial exercise thereof preclude any other future exercise, or the
exercise of any other right, power, remedy or privilege. In particular, and not
by way of limitation, by accepting payment after the due date of any amount
payable under this Agreement, no Indemnified Party shall be deemed to have
waived any right either to require prompt payment when due of all other amounts
due under this Agreement, or to declare a default for failure to effect prompt
payment of any such other amount.
Section 7. Notices. All notices, consents, approvals and requests required
-------
or permitted hereunder shall be given in writing and shall be effective for all
purposes if hand delivered or sent by (a) hand delivery, with proof of attempted
delivery, (b) certified or registered United
<PAGE>
States mail, postage prepaid, (c) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted delivery, or
(d) by telecopier (with answerback acknowledged) provided that such telecopied
notice must also be delivered by one of the means set forth in (a), (b) or (c)
above, addressed if to Owner, Healthcare Realty, Key, SELCO or Administrator at
their addresses set forth on the first page hereof, and if to Guarantor at its
designated address set forth on the first page hereof, or at such other address
and Person as shall be designated from time to time by any party hereto, as the
case may be, in a written notice to the other parties hereto in the manner
provided for in this Section 7. A copy of all notices, consents, approvals and
---------
requests directed to Guarantor shall be delivered concurrently to each of the
following: Brookdale Living Communities of California, Inc., 77 West Wacker
Drive, Chicago, Illinois 60601, Attention: Darryl W. Copeland, Jr., Telefax
Number (312) 977-3699; Brookdale Living Communities of California, Inc., 77 West
Wacker Drive, Chicago, Illinois 60601, Attention: Robert J. Rudnik, Esquire,
Telefax Number (312) 977-3769; and Douglas E. Wambach, Burke, Warren, MacKay &
Serritella, 330 North Wabash Avenue, 22nd Floor, Chicago, Illinois 60611-3607,
Telefax Number (312) 840-7900. A notice shall be deemed to have been given: (a)
in the case of hand delivery, at the time of delivery; (b) in the case of
registered or certified mail, when delivered or the first attempted delivery on
a Business Day; (c) in the case of expedited prepaid delivery upon the first
attempted delivery on a Business Day; or (d) in the case of telecopier, upon
receipt of answerback confirmation received prior to 5:00 p.m. local time on a
Business Day or if confirmation received thereafter on the next succeeding
Business Day, provided that such telecopied notice was also delivered as
required in this Section 7. A party receiving a notice which does not comply
---------
with the technical requirements for notice under this Section 7 may elect to
---------
waive any deficiencies and treat the notice as having been properly given.
Section 8. Trial by Jury. GUARANTOR AND EACH INDEMNIFIED PARTY, TO THE
-------------
FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY
HERETO WITH RESPECT TO THIS AGREEMENT.
Section 9. Successors and Assigns. All references to each "Indemnified
----------------------
Party" hereunder shall be deemed to include the successors and assigns of each
Indemnified Party, including any trustee or servicer.
Section 10. Severability. Wherever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 11. Heading and Recitals. The information set forth in the heading
--------------------
and recitals hereof are hereby incorporated herein as a part of this Agreement
with the same effect as if set forth in the body hereof.
<PAGE>
Section 12. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
Section 13. Estoppel Certificates. Guarantor and the Indemnified Parties
---------------------
each hereby agree at any time and from time to time upon not less than 15 days
prior written notice by Guarantor or the Indemnified Parties to execute,
acknowledge and deliver to the party specified in such notice, a statement, in
writing, certifying that this Agreement is unmodified and in full force and
effect (or if there have been modifications, that the same, as modified, is in
full force and effect and stating the modifications hereto), and stating whether
or not, to the best knowledge of such certifying party, there exists any matter
giving rise to a claim under Section 2, and, if so, specifying each such matter;
---------
provided, however, that it shall be a condition precedent to the Indemnified
- --------
Parties obligation to deliver the statement pursuant to this Section 13, that
----------
each Indemnified Party shall have received, together with Guarantor's request
for such statement, an officer's certificate signed by an authorized officer of
Guarantor stating that to the best of Guarantor's knowledge, no matter which
could give rise to a claim under Section 2 exists as of the date of such
---------
certificate (or specifying each such matter).
Section 14. Survival. This Agreement shall survive (in perpetuity) the
--------
closing and disbursement of the funds evidenced by the Investor Loans and the
termination of the Lease, reconveyance, discharge or foreclosure of the
Leasehold Deed of Trust, conveyance by deed in lieu of foreclosure, transfer,
and any subsequent conveyance of the Leased Property. Notwithstanding the
foregoing, Guarantor shall not indemnify any Indemnified Party with respect to
any losses or damages incurred in connection with, or as a direct result of, any
or all of the matters described in Section 21(a) through Section 21(g) of the
Lease to the extent that Guarantor can establish directly and solely that such
losses or damages result from Hazardous Materials being placed on, above or
under the Leased Property (a) by the affirmative act or gross negligence of such
Indemnified Party or any employees, agents or bailees of such Indemnified Party
or (b) subsequent to the termination of the Lease and sale or reletting of the
Leased Property by Owner as provided in Section 32 of the Lease.
Section 15. Time of the Essence. Time is of the essence with respect to
-------------------
each and every covenant, agreement and obligation of Guarantor under this
Agreement.
Section 16. Liability. The liability of Guarantor under this Agreement
---------
shall in no way be limited or impaired by (a) any amendment or modification of
the Transaction Documents made in accordance therewith, (b) any extensions of
time for performance required by any of the Transaction Documents, or (c) the
release or substitution in whole or in part, of any security for the Senior
Debt, the Investor Loans or other evidence of debt issued pursuant to the
Transaction Documents; and in any of such cases, whether with or without notice
to Guarantor and with or without consideration.
[Signature on the following page]
<PAGE>
[SIGNATURE PAGE TO INDEMNITY AGREEMENT]
IN WITNESS WHEREOF, the Guarantor has caused this Indemnity Agreement to be
duly executed by its duly authorized representative, all as of the day and year
first above written.
GUARANTOR:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By: ____________________________
Name:
Title:
